-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NXn6VCMrucj0aOjsMTAmatXuE/2moR12zVDC2JGXMY8MPsihGJ+JB+tmgFU8eFvL B2Mxfa2gngZg+E1z7qC4Aw== 0000950152-01-001970.txt : 20010402 0000950152-01-001970.hdr.sgml : 20010402 ACCESSION NUMBER: 0000950152-01-001970 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 34 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NACCO INDUSTRIES INC CENTRAL INDEX KEY: 0000789933 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL TRUCKS TRACTORS TRAILERS & STACKERS [3537] IRS NUMBER: 341505819 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09172 FILM NUMBER: 1586424 BUSINESS ADDRESS: STREET 1: 5875 LANDERBROOK DR CITY: MAYFIELD HTS STATE: OH ZIP: 44124-4017 BUSINESS PHONE: 2164499600 10-K 1 l87125be10-k.txt NACCO INDUSTRIES, INC. FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NO. 1-9172 NACCO INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE ---------------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 5875 Landerbrook Drive, Mayfield Heights, Ohio ---------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 34-1505819 ---------------------------------------------------- (I.R.S. EMPLOYER IDENTIFICATION NO.) 44124-4017 ---------------------------------------------------- (ZIP CODE) Registrant's telephone number, including area code: (440) 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 check mark 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, 2001: $334,241,024 Number of shares of Class A Common Stock outstanding at February 28, 2001: 6,550,082 Number of shares of Class B Common Stock outstanding at February 28, 2001: 1,641,637 DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the Company's 2000 Annual Report are incorporated herein by reference in Part I and Part II; and (2) Portions of the Company's Proxy Statement for its 2001 annual meeting of stockholders are 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 whose four principal operating subsidiaries function in three distinct industries: lignite mining, lift trucks and housewares. (a) North American Coal. The Company's wholly owned subsidiary, The North American Coal Corporation, and its affiliated coal companies (collectively, "NACoal"), mine and market lignite for use primarily as fuel for power providers. NACoal also provides dragline mining services for a limerock quarry near Miami, Florida. NACoal accounted for 10% and 27% of NACCO's revenues and operating profits, respectively, in 2000. (b) NACCO Materials Handling Group. NACCO Materials Handling Group consists of the Company's wholly owned subsidiary, NMHG Holding Co., and its wholly owned subsidiaries (collectively, "NMHG"), including NACCO Materials Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG Retail"). NMHG, through NMHG Wholesale and NMHG Retail, designs, engineers, manufactures, sells and services a full line of lift trucks and service parts marketed worldwide under the Hyster(R) and Yale(R) brand names. NMHG Wholesale includes the manufacture and sale of lift trucks and related service parts, primarily to independent and wholly owned Hyster and Yale retail dealerships. NMHG Retail includes the sale, leasing and service of Hyster and Yale lift trucks and related service parts by wholly owned retail dealerships. NMHG Wholesale accounted for 61% and 73% of NACCO's revenues and operating profits, respectively, in 2000. NMHG Retail, including the elimination of intercompany transactions, accounted for 7% of NACCO's revenues and reduced operating profits by 13% in 2000. (c) NACCO Housewares Group. NACCO Housewares Group ("Housewares") consists of two of the Company's wholly owned subsidiaries: Hamilton BeachoProctor-Silex, Inc. ("HB-PS"), a leading manufacturer and marketer of small electric motor and heat-driven appliances as well as commercial products for restaurants, bars and hotels, and The Kitchen Collection, Inc. ("KCI"), a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. Housewares accounted for 22% and 23% of NACCO's revenues and operating profits, respectively, in 2000. Additional information relating to financial and operating data on a segment basis (including NACCO and Other, which reduced operating profits by 10% in 2000) is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2000 Annual Report (the "2000 Annual Report") and in Note 20 to the Consolidated Financial Statements in the 2000 Annual Report, which portions of the 2000 Annual Report are incorporated herein by reference. 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. As of February 28, 2001, the Company and its subsidiaries had approximately 17,200 employees. SIGNIFICANT EVENTS In September 1997, Phillips Coal Company and NACoal formed Mississippi Lignite Mining Company, a joint venture (75% owned by Phillips Coal Company and 25% owned by NACoal), to develop a new lignite mine in Mississippi (the "Red Hills Mine"). The 30 year lignite sales contract between the joint venture and the electric power facility was entered into on April 1, 1998. Development of the Red Hills Mine began in 1998 and has continued through 2000. Delivery of lignite to the Red Hills Mine's customer is expected to begin gradually during the first half of 2001. The customer's power plant is expected to be fully operational by mid-2001. On October 11, 2000, NACoal acquired certain assets from Phillips Coal Company, including its 75% joint venture interest in Mississippi Lignite Mining Company, its 50% joint venture interest in Red River Mining Company and the related lignite reserves under committed contracts at both of these mines. As a result of the acquisition, NACoal now owns 100% of Mississippi Lignite Mining Company and Red River Mining Company. In addition, NACoal acquired from Phillips Coal Company approximately 560 million tons of undeveloped lignite reserves in Texas, Mississippi and Tennessee. In 1998, NMHG, through NMHG Retail, implemented a strategy of acquiring or investing in certain independently owned Hyster and Yale and competitor retail dealerships and rental companies. From January 1, 1998 through December 31, 2000, NMHG Retail had acquired and consolidated two dealerships in the United States, 13 dealerships and rental companies in Europe and 16 dealerships and rental companies in Asia-Pacific. On January 2, 2001, NMHG announced that it will close its manufacturing operation in Danville, Illinois as part of a manufacturing plant consolidation strategy that will enable NMHG to reduce its cost structure while optimizing its global manufacturing capacity. The phase-out of the Danville facility is currently expected to take approximately 12 months. 1 3 In December 1998, HB-PS entered into an agreement to lease a 500,000 square foot distribution center in Memphis, Tennessee. The new distribution center has allowed HB-PS to consolidate its distribution network and is expected to enhance efficiencies and customer service. The new distribution center became operational during the second quarter of 1999. In December 2000, HB-PS entered into an agreement to expand the Memphis distribution center by an additional 400,000 square feet. Construction of this expansion is underway and is expected to be completed in the second quarter of 2001. In 1999, HB-PS entered into a private label arrangement with Wal-Mart which is scheduled to continue through the spring of 2002. Wal-Mart had previously licensed certain trademarks from General Electric Company for use with small kitchen and other appliances for exclusive sale in Wal-Mart stores worldwide. Wal-Mart selected several manufacturers to supply these GE-branded products. HB-PS was named the lead supplier for this program. HB-PS began shipping the GE-branded products in the third quarter of 2000. In 2000, HB-PS introduced several air purification and humidification products under the Hamilton Beach(R) brand, thus entering the home environment segment of the small appliance industry for the first time. Related to this introduction, in 2000, HB-PS test-marketed TrueAir(TM), an odor elimination product. BUSINESS SEGMENT INFORMATION A. NORTH AMERICAN COAL GENERAL NACoal is engaged in the mining and marketing of lignite for use primarily as fuel for power providers. Sales by NACoal are made primarily 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 NACoal for the financing of these subsidiary mines. NACoal also provides dragline mining services for a limerock quarry near Miami, Florida. At December 31, 2000, NACoal's operating mines consist of mines where the reserves were acquired and developed by NACoal, except for the South Hallsville No. 1 Mine and the San Miguel Lignite Mine where reserves are owned by the customers of these mines. NACoal 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 11 to the Consolidated Financial Statements included in the 2000 Annual Report. Project mining subsidiaries accounted for 18% and 25% of NACCO's assets and liabilities, respectively, as of December 31, 2000, while their operations accounted for 9% and 36% of NACCO's revenues and operating profits, respectively, in 2000. SALES, MARKETING AND OPERATIONS The principal customers of NACoal are electric utilities, an independent power provider and a synfuels plant. Sales to one customer, which supplies coal to four facilities, accounted for 47%, 47% and 45% of NACoal's revenues in 2000, 1999 and 1998, respectively. The distribution of sales in the last five years has been as follows: DISTRIBUTION ------------ ELECTRIC TOTAL UTILITIES/ TONS SOLD INDEPENDENT SYNFUELS (MILLIONS) POWER PROVIDER PLANT ---------- -------------- -------- 2000 31.6 80% 20% 1999 31.3 80% 20% 1998 31.7 80% 20% 1997 29.9 80% 20% 1996 27.6 77% 23% 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. In addition, since July 1, 2000, the customer for NACoal's San Miguel Lignite Mine may elect to terminate the contract for convenience at any time. NACoal does not know of any conditions of default that currently exist. In addition, NACoal does not know of any customer's intent to acquire stock of a subsidiary or terminate a contract for convenience. The location, mine type, reserve data, coal quality characteristics, customer, sales tonnage and contract expiration date for the mines operated by NACoal in 2000 were as follows: 2 4
DEVELOPED LIGNITE MINING OPERATIONS ----------------------------------- PROVEN AND PROBABLE RESERVES (1) -------------------------------- COMMITTED UNDER AVERAGE PROJECT MINING CONTRACT UNCOMMITTED BTUS SUBSIDIARIES MINE LOCATION TYPE OF MINE (MILLIONS OF TONS) (MILLIONS OF TONS) PER POUND - -------------- ---- -------- ------------ ------------------ ------------------ --------- The Coteau Properties Freedom Mine (2) Beulah, ND Surface Lignite 522.9 ---- 6,767 Company The Falkirk Mining Falkirk Mine (2) Underwood, ND Surface Lignite 516.2 ---- 6,200 Company The Sabine Mining South Hallsville Hallsville, TX Surface Lignite (4) (4) (4) Company No. 1 Mine (2) OTHER - ----- San Miguel Lignite San Miguel Lignite Jourdanton, TX Surface Lignite (5) (5) (5) Mining Operations Mine Red River Mining Oxbow Mine Coushatta, LA Surface Lignite 8.3 45.8 6,722 Company Mississippi Lignite Red Hills Mine Ackerman, MS Surface Lignite 165.2 126.7 5,200 Mining Company ----- ----- Total Developed 1,212.6 172.5 UNDEVELOPED MINING OPERATIONS - ----------------------------- North Dakota ---- ---- ---- ---- 566.5 6,428 Texas ---- ---- ---- ---- 393.4 6,800 Eastern ---- ---- ---- 64.4 65.4 12,070 Mississippi ---- ---- ---- ---- 223.5 5,200 Tennessee ---- ---- ---- ---- 117.5 5,000 ---- ----- Total Undeveloped 64.4 1,366.3 Total Developed/ 1,277.0 1,538.8 Undeveloped
AVERAGE SULFUR 2000 SALES PROJECT MINING CONTENT PER UNIT TONNAGE CONTRACT SUBSIDIARIES OF WEIGHT CUSTOMER(S) (PLANT) (MILLIONS) EXPIRES - -------------- ---------------- ------------------- ----------- -------- The Coteau Properties 0.8% Dakota Coal Company 6.1 2007(3) Company (Great Plains Synfuels Plant) Dakota Coal Company 5.8 2007(3) (Antelope Valley Station) Dakota Coal Company 3.3 2007(3) (Leland Olds Station) Dakota Coal Company 1.0 2002 (Stanton Station of United Power Association) The Falkirk Mining 0.6% United Power Association/ 7.7 2020 Company Cooperative Power Association (Coal Creek Station) The Sabine Mining (4) Southwestern Electric Power Company 3.5 2020 Company (Henry W. Pirkey Power Plant) OTHER - ----- San Miguel Lignite (5) San Miguel Electric Cooperative, 3.4 2007 Mining Operations Inc. (San Miguel Power Plant) Red River Mining 0.7% Central Louisiana Electric 0.8 2010 Company Company/Southwestern Electric Power Company (Dolet Hills Power Plant) Mississippi Lignite 0.7% Choctaw Generation Limited 0.0 2031 Mining Company Partnership (Red Hills Power Plant) UNDEVELOPED MINING OPERATIONS - ----------------------------- North Dakota 0.7% ---- ---- ---- Texas 1.0% ---- ---- ---- Eastern 3.3% ---- ---- ---- Mississippi 0.6% ---- ---- ---- Tennessee 0.6% ---- ---- ----
(1) The projected extraction loss is approximately ten percent (10%) of the proven and probable reserves, except with respect to the reserves for the Eastern Undeveloped Mining Operations, in which case the extraction loss is approximately thirty percent (30%) of the proven and probable reserves. (2) 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. (3) Although the term of the existing coal sales agreement terminates in 2007, the term may be extended for six (6) additional periods of five years, or until 2037, at the option of The Coteau Properties Company. (4) The reserves of the South Hallsville No. 1 Mine are owned and controlled by the customer and, therefore, have not been listed in the table. (5) The reserves of the San Miguel Lignite Mine are owned and controlled by the customer and, therefore, have not been listed in the table. 3 5 GOVERNMENT REGULATION NACoal, like other coal producers, continues to be subject to Federal and state health, safety and environmental regulations. The 2001 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 $3.8 million for certain closed mines and are included in the caption "Self-insurance Reserves and Other" in NACCO's Consolidated Financial Statements in the 2000 Annual Report. 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. NACoal's management believes that the Clean Air Act Amendments, which became effective in 1990, have not had and will not have a material adverse effect on its current operations, because substantially all of the power generating facilities operated or supplied by NACoal's customers meet or exceed the requirements of the Clean Air Act. 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, environmental considerations, the time and expenditures required to develop new energy sources, the cost of transportation, the cost of compliance with governmental regulation of operations, the impact of Federal and state energy policies and the current trend toward deregulation of energy markets. The ability of NACoal 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 NACoal believes that it was the eighth largest coal producer in the United States in 2000 based on total coal tons sold. EMPLOYEES As of February 28, 2001, NACoal had approximately 1,100 employees. B. NACCO MATERIALS HANDLING GROUP 1. NMHG WHOLESALE GENERAL NMHG Wholesale is a leading worldwide designer, manufacturer and marketer of forklift trucks, which comprise the largest segment of the materials handling equipment industry. NMHG Wholesale accounted for 53% and 45% of NACCO's assets and liabilities, respectively, as of December 31, 2000, while its operations accounted for 61% and 73% of NACCO's revenues and operating profits, respectively, in 2000. THE INDUSTRY Forklift trucks are used in a wide variety of business applications, including manufacturing and warehousing. The materials handling industry, especially in industrialized nations, is generally a mature industry, which has historically 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. Over the past decade, the worldwide market for forklift trucks has gradually increased to approximately 591,000 units. Although individual geographic markets have been subject to cyclicality over this time, both the North American and European markets reached new highs in 2000. Widely publicized financial problems reversed growth trends in Japan in the late 1990's. However, the Japanese market showed a modest improvement in 2000. Similarly, while the late 1997 Asian financial crisis has negatively affected lift truck demand in that region, improved demand was seen in the Asia-Pacific market in 2000. COMPANY OPERATIONS NMHG Wholesale maintains product differentiation between Hyster and Yale brands of forklift trucks and distributes its products through separate worldwide dealer networks. Nevertheless, NMHG Wholesale has integrated overlapping operations and takes advantage of economies of scale in design, manufacturing and purchasing. NMHG Wholesale provides virtually all of its own design, manufacturing and administrative functions. Products are marketed and sold through two separate primarily independent dealer networks which retain and promote the Hyster and Yale brand names. In Japan, NMHG Wholesale has a 50% owned joint venture with Sumitomo Heavy Industries Ltd. which is generally known as Sumitomo-NACCO Materials Handling Group ("S-N"). S-N performs certain design activities and produces lift trucks and components which it markets in Japan under the name "Sumitomo Yale" and which are exported for sale by NMHG Wholesale and its affiliates in the Americas, Europe and Asia-Pacific. 4 6 PRODUCT LINES NMHG Wholesale designs and manufactures a wide range of forklift trucks under both the Hyster and Yale 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 82%, 83% and 83% of NMHG Wholesale's net sales in 2000, 1999 and 1998, respectively. NMHG Wholesale 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 and Yale forklift trucks now in service provides a market for service parts. In addition to parts for its own forklift trucks, NMHG Wholesale has a program in North America, UNISOURCE(TM), and in Europe, MULTIQUIP(TM), designed to supply Hyster dealers with replacement parts for most competing brands of forklift trucks. NMHG Wholesale has a similar program, PREMIER(TM), for its Yale dealers in the Americas and Europe. Accordingly, NMHG Wholesale 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. Service parts accounted for approximately 18%, 17% and 17% of NMHG's net sales in 2000, 1999 and 1998, respectively. For further information on geographic regions, see Note 20 to the Consolidated Financial Statements in the 2000 Annual Report. COMPETITION Although there is no official source for information on the subject, NACCO believes that in 2000 NMHG Wholesale was one of the leading manufacturers of forklift trucks in the world, based on the number of lift trucks sold. The forklift truck industry is highly competitive. The worldwide competitive structure of the industry is fragmented by product line and country; however, each of the three largest forklift truck manufacturers, including NMHG, has a significantly greater market position on a unit volume basis than the other manufacturers. The principal methods of competition among forklift truck manufacturers are product performance, price, service and distribution networks. The forklift truck industry also competes with alternative methods of materials handling, including conveyor systems, automated guided vehicle systems and manual 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. NMHG Wholesale'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 Wholesale believes that it has a significant share of unit sales of electric rider and ICE forklift trucks in Western Europe. TRADE RESTRICTIONS UNITED STATES Since June 1988, Japanese-built ICE forklift trucks imported into the United States, 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 2000 range from 7.39% to 56.81% depending on manufacturer or importer. The antidumping duty rate applicable to imports from S-N is 51.33%. NMHG Wholesale 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 (the "Commerce Department") 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 the Commerce Department or the U.S. International Trade Commission finds that changed circumstances exist sufficient to warrant the retirement of the order. All of NMHG Wholesale's major Japanese competitors have either built or acquired manufacturing or assembly facilities in the United States. NMHG Wholesale cannot predict with any certainty if there have been or will be any negative effects to it resulting from Japanese manufacturers sourcing their forklift products from the United States. The legislation implementing the Uruguay round of GATT negotiations passed in 1994 provided for the antidumping order to be reviewed for possible retirement in 2000. NMHG Wholesale opposed retirement of the order and the 2000 review did not result in retirement of the antidumping duty. The antidumping order will again be reviewed for possible retirement in 2005. EUROPE There are no formal restraints on foreign forklift manufacturers in the European Union. Several Japanese manufacturers have established manufacturing or assembly facilities within the European Union. 5 7 PRODUCT DESIGN AND DEVELOPMENT NMHG Wholesale spent $43.9 million, $41.4 million and $38.6 million on product design and development activities in 2000, 1999 and 1998, respectively. The Hyster and Yale products are differentiated for the specific needs of their respective customer bases. NMHG Wholesale continues to pursue opportunities to improve product costs by engineering new Hyster and Yale brand products with component commonality. In addition, certain product design and development activities with respect to ICE forklift trucks and some components are performed in Japan by S-N. S-N spent approximately $4.0 million, $4.1 million and $4.3 million on product design and development in 2000, 1999 and 1998, respectively. BACKLOG As of December 31, 2000, NMHG Wholesale's backlog of unfilled orders for forklift trucks was approximately 21,800 units, or $373 million, of which substantially all is expected to be filled during fiscal 2001. This compares to the backlog as of December 31, 1999 of approximately 21,500 units, or $362 million. An increase in the rate of incoming orders for forklift trucks in 2000 primarily caused this slight increase in backlog levels. Backlog represents unit orders to NMHG Wholesale's manufacturing plants from NMHG Retail, independent dealerships, retail customers and contracts with the United States government. Although these orders are believed to be firm, such orders may be subject to cancellation or modification. SOURCES NMHG Wholesale has adopted a strategy of obtaining its raw materials and principal components on a global basis from competitively priced sources. NMHG Wholesale 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 Wholesale if it were unable to obtain all or a significant portion of such components, or if the cost of such components was to increase significantly under circumstances which prevented NMHG Wholesale from passing on such increases to its customers. DISTRIBUTION The Hyster and Yale brand products are distributed through separate highly developed worldwide dealer networks which are primarily independently owned. For further information, see the discussion under the heading "NMHG Retail" below. In addition, NMHG Wholesale has an internal sales force for each brand to sell directly to major customers. In Japan, forklift truck products are distributed by S-N. FINANCING OF SALES In 1998, NMHG Wholesale amended its existing joint venture agreement with General Electric Capital Corporation ("GE Capital") to provide that GE Capital would furnish leasing and financing services to selected Hyster dealers in North America in addition to the Yale dealers GE Capital was already supporting under the agreement. NMHG Wholesale owns 20% of the joint venture entity, NMHG Financial Services, Inc., and is entitled to certain fees and remarketing profits. In addition, NMHG Wholesale entered into an International Operating Agreement with GE Capital pursuant to which GE Capital provides leasing and financing services to Hyster and Yale dealers throughout the major countries of the world outside of North America and makes referral fee payments to NMHG Wholesale once certain financial thresholds are reached. Each of these agreements expire in 2003. United States Hyster dealer sales and direct sales of Hyster products in the United States were supported by leasing and financing services provided by Hyster Credit Company, a third-party financial entity, pursuant to an operating agreement that expired in December 2000. NMHG elected not to renew or extend the agreement because NMHG Financial Services is able to provide all leasing and financing services formerly provided by Hyster Credit Company. EMPLOYEES As of February 28, 2001, NMHG Wholesale had approximately 7,400 employees. Employees in the Danville, Illinois manufacturing and parts depot operations (approximately 825 employees) are unionized, as are tool room employees (approximately 19 employees) located in Portland, Oregon. NMHG has a contract with union employees in Danville, Illinois. NMHG announced on January 2, 2001 that it would phase out the manufacturing plant in Danville over the course of a 12 to 18 month period. Subsequently, NMHG decided to shorten the phase-out period to approximately 12 months. As a result of its decision to close the Danville plant, NMHG held discussions with the union over the impact of the plant closure. On March 15, 2001, NMHG and the union reached an agreement regarding the terms of the plant closure. A two-year contract with the Portland tool room union expires in 2003. 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. In Mexico, shop employees are unionized. 6 8 NMHG Wholesale's management believes its current labor relations with both union and non-union employees are generally satisfactory. However, there can be no assurances that NMHG Wholesale will be able to successfully renegotiate its union contracts without work stoppages or on acceptable terms. GOVERNMENT REGULATION NMHG Wholesale's manufacturing facilities, in common with others in the industry, are subject to numerous laws and regulations designed to protect the environment, particularly with respect to disposal of plant waste. NMHG Wholesale's products are also subject to various industry and governmental standards. NMHG Wholesale's management believes that the impact of expenditures to comply with such requirements will not have a material adverse effect on NMHG Wholesale. PATENTS, TRADEMARKS AND LICENSES NMHG Wholesale is not materially dependent upon patents or patent protection. NMHG Wholesale is the owner of the Hyster trademark, which is currently registered in approximately 55 countries. The Yale trademark, which is used on a perpetual royalty-free basis by NMHG Wholesale in connection with the manufacture and sale of forklift trucks and related components, is currently registered in approximately 150 countries. NMHG Wholesale's management believes that its business is not dependent upon any individual trademark registration or license, but that the Hyster and Yale trademarks are material to its business. FOREIGN OPERATIONS For a description of revenues and other financial information by geographic region, see Note 20 to the Consolidated Financial Statements in the 2000 Annual Report. 2. NMHG RETAIL GENERAL In 1998, NMHG, through NMHG Retail, implemented a strategy of acquiring or investing in certain independently owned Hyster and Yale and competitor retail dealerships and rental companies. NMHG Retail believes its expansion into retail distribution will be beneficial in the long term because of the potential revenue that occurs at the retail level from new and used unit sales, service part sales, rental income and the maintenance and repair business. NMHG Retail believes that ownership of retail dealers will ensure strategic alignment of its manufacturing with its distribution and will streamline its distribution channel. NMHG Retail's ownership and operation of retail dealers and rental companies will allow it to financially strengthen this portion of its distribution organization. NMHG Retail intends to continue to evaluate expansion opportunities while maintaining a primary focus on strengthening the existing owned dealer network. For further information, see the 2000 Annual Report under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." From January 1, 1998 through December 31, 2000, NMHG Retail has acquired and consolidated two dealerships in the United States, 13 dealerships and rental companies in Europe and 16 dealerships and rental companies in Asia-Pacific. NMHG Retail, including the elimination of intercompany transactions, accounted for 3% and 4% of NACCO's assets and liabilities, respectively, as of December 31, 2000, while its operations accounted for 7% of NACCO's revenues and reduced operating profits by 13% in 2000. THE INDUSTRY Forklift trucks are sold at the retail level worldwide by independent dealers and by dealerships owned by the original equipment manufacturer (OEM). Some OEMs distribute exclusively through independent dealers, some OEMs distribute exclusively through owned dealerships and some OEMs (such as NMHG Wholesale), distribute through a combination of independent and owned dealerships. NMHG believes there is a growing trend by OEMs in the forklift industry to acquire their dealerships. Forklifts are also leased on a short- and long-term basis at the retail level by dealerships and independent rental companies. COMPANY OPERATIONS An NMHG Retail dealership is authorized to sell and rent either Hyster or Yale brand materials handling equipment. These dealerships will typically also sell allied lines of equipment from other manufacturers pursuant to dealer agreements. Allied equipment includes such items as sweepers, aerial work platforms, personnel carts, rough terrain forklifts and other equipment as well as racking and shelving. The number and type of products available will vary from dealership to dealership. A primary source of revenue for dealerships is the sale of parts and service for equipment sold by the dealership. Service is performed both in-shop and on-site. In addition to the outright sale of new and used equipment, dealerships provide equipment for lease and for long- or short-term rental. NMHG Retail dealerships are granted a primary geographic territory by NMHG Wholesale in which they operate. NMHG Retail operations are conducted at branch facilities located in major cities within NMHG Retail's assigned area of operations. 7 9 COMPETITION The materials handling equipment sales and rental industry is highly fragmented and competitive. NMHG Retail's competitors primarily include: its own independent Hyster and Yale dealers, OEM owned dealers for competing brands, OEM direct sales efforts, independently owned competitive dealerships and equipment rental companies, independent parts operations and independent service shops. The forklift truck industry also competes with alternative methods of materials handling, including conveyor systems, automated guided vehicle systems and manual labor. CUSTOMERS NMHG Retail's customer base is highly diversified and ranges from Fortune 100 companies to small businesses in virtually every type of manufacturing and service industry. No single customer accounted for more than 10% of NMHG Retail's revenues during 2000. NMHG Retail's customer base varies widely by branch and is determined by several factors, including the equipment mix and marketing focus of the particular branch and the business composition of the local economy. FINANCING OF SALES NMHG Retail dealerships may obtain wholesale and retail financing for the sale and leasing of equipment through NMHG Financial Services, a joint venture between NMHG Wholesale and GE Capital. This affords these dealerships with a wide variety of financial products at competitive rates. See also "Financing of Sales" under NMHG Wholesale above. EMPLOYEES As of February 28, 2001, NMHG Retail had approximately 1,900 employees. GOVERNMENT REGULATION NMHG Retail's operations, like others in similar operations, are subject to numerous laws and regulations designed to protect the environment, particularly with respect to the disposal of cleaning solvents and wastewater and the use of and disposal of petroleum products from underground and above-ground storage tanks. NMHG Retail is currently assessing the nature of any environmental problems and remediation requirements at its recently acquired dealerships. Based on currently known facts, NMHG Retail's management believes that any environmental remediation and compliance costs will not have a material adverse effect on NMHG Retail. However, the assessment is in a preliminary stage and no assurance can be given that environmental remediation and compliance costs resulting from NMHG Retail's final assessment will not have a material adverse effect on NMHG Retail. FOREIGN OPERATIONS For a description of revenues and other financial information by geographic region, see Note 20 to the Consolidated Financial Statements in the 2000 Annual Report. C. NACCO HOUSEWARES GROUP GENERAL NACCO Housewares Group consists of HB-PS and KCI. HB-PS believes that it is the largest full-line manufacturer and marketer of small electric kitchen appliances in North America based on market share of key product categories. HB-PS' products are marketed primarily to retail merchants and wholesale distributors. KCI is a national specialty retailer of kitchenware, small electric appliances and related accessories that operated 157 retail stores as of December 31, 2000. Stores are located primarily in factory outlet complexes that feature merchandise of highly recognizable name-brand manufacturers, including HB-PS. Housewares accounted for 17% and 12% of NACCO's assets and liabilities, respectively, as of December 31, 2000, while its operations accounted for 22% and 23% of NACCO's revenues and operating profits, respectively, in 2000. SALES AND MARKETING HB-PS manufactures and markets a wide range of small electric household appliances, including motor-driven appliances such as blenders, mixers, can openers and food processors, and heat-driven appliances such as coffeemakers, irons, toasters, indoor grills and slow cookers. In 2000, HB-PS entered the home environment market with a line of humidifiers and air purifiers. HB-PS also makes commercial products for restaurants, bars and hotels. HB-PS generally markets its "better" and "best" segments under the Hamilton Beach(R) brand and uses the Proctor-Silex(R) brand for the "good" and "better" segments. In addition, HB-PS supplies Wal-Mart with GE-branded kitchen electric and garment-care appliances under Wal-Mart's license agreement with General Electric Company and, in 2000, test marketed a home odor elimination product under the TruAir brand name. HB-PS generally markets its products primarily in North America, but also sells products in Latin America, Asia-Pacific and Europe. Sales are generated predominantly by a network of inside sales employees to mass merchandisers, national department stores, variety store chains, drug store chains, specialty home retailers and other retail outlets. Principal customers include Wal-Mart, Kmart, Target, Ames, Canadian Tire, Dollar General, Family Dollar, Bed, Bath & Beyond, Sears and Zellers. Sales promotional activities are primarily focused on cooperative advertising. 8 10 Because of the seasonal nature of the markets for small electric appliances, HB-PS' management believes that backlog is not a meaningful indicator of performance and is not a significant indicator of annual sales. As of December 31, 2000, backlog for HB-PS was approximately $6.6 million. This compares with the backlog as of December 31, 1999 of approximately $5.2 million. This backlog represents customer orders, which may be canceled at any time prior to shipment. HB-PS' warranty program to the consumer consists generally of a limited warranty lasting for varying periods of up to three years for electric appliances. Under its warranty program, HB-PS may repair or replace, at its option, those products found to contain manufacturing defects. Revenues and operating profit for Housewares are traditionally greater in the second half of the year as sales of small electric appliances to retailers and consumers increase significantly with the fall holiday selling season. Because of the seasonality of purchases of its products, HB-PS incurs substantial short-term debt to finance inventories and accounts receivable during this period. PRODUCT DESIGN AND DEVELOPMENT The Housewares Group spent $8.0 million in 2000, $6.6 million in 1999 and $5.5 million in 1998 on product design and development activities. All of these expenditures were made by HB-PS. SOURCES The principal raw materials used to manufacture and distribute HB-PS' products are steel, aluminum, plastic and packaging materials. HB-PS' management believes that adequate quantities of raw materials are available from various suppliers. COMPETITION The small electric household appliance industry is highly competitive. Based on publicly available information about the industry, HB-PS' management believes it is the largest full-line manufacturer and marketer of small electric kitchen appliances in North America based on key product categories. As retailers generally purchase a limited selection of small electric appliances, HB-PS competes with other suppliers for retail shelf space and focuses its primary marketing efforts on retailers rather than consumers. Since 1996, HB-PS has also conducted consumer advertising for the Hamilton Beach(R) brand. HB-PS' management believes that the principal areas of competition with respect to its products are quality, price, product design, product features, merchandising, promotion and warranty. HB-PS' management believes that it is competitive in all of these areas. As the outlet channel of the retail industry is approaching maturity, the management of KCI continues to explore alternate areas of growth and diversification. For the past several years, KCI has been testing alternative store formats both within the outlet industry and the more traditional retail environments. Because not all of these formats have met KCI's rigorous financial performance standards, KCI continues to explore alternate channels of distribution, including distribution through the Internet. GOVERNMENT REGULATION HB-PS, in common with other manufacturers, is subject to numerous Federal and state health, safety and environmental regulations. HB-PS' management believes that the impact of expenditures to comply with such laws will not have a material adverse effect on HB-PS. HB-PS' products are subject to testing or regulation by Underwriters' Laboratories, the Canadian Standards Association and various entities in foreign countries that review product design. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES HB-PS holds patents and trademarks registered in the United States and foreign countries for various products. HB-PS' management believes that its business is not dependent upon any individual patent, trademark, copyright or license, but that the Hamilton Beach and Proctor-Silex trademarks are material to its business. EMPLOYEES As of February 28, 2001, Housewares' work force consisted of approximately 6,700 employees, most of which are not represented by unions. In Canada, approximately 17 hourly employees at HB-PS' Picton, Ontario distribution facility are unionized. These employees are represented by an employee association which performs a consultative role on employment matters. On February 1, 2001, a collective bargaining agreement, which expires on January 31, 2002, was executed for HB-PS' Saltillo manufacturing facility. There are approximately 1,789 employees subject to the terms of the Saltillo agreement. The management of HB-PS and KCI believe their current labor relations with both union and non-union employees are satisfactory. However, there can be no assurances that HB-PS will be able to successfully renegotiate its union contracts without work stoppages or on acceptable terms. A prolonged work stoppage at a unionized facility could materially adversely affect Housewares' business and results of operations. 9 11 ITEM 2. PROPERTIES A. NACCO NACCO currently leases its corporate headquarters building in Mayfield Heights, Ohio. B. NACOAL NACoal'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 2.8 billion tons, all of which are lignite deposits, except for approximately 130 million tons of bituminous coal. Reserves are estimates of quantities of coal, made by NACoal'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. Information concerning mine type, reserve data and coal quality characteristics for NACoal's properties are set forth on the table on page 3 under "Item 1. Business -- A. North American Coal -- Sales, Marketing and Operations." 10 12 C. NMHG 1. NMHG WHOLESALE The following table summarizes certain information with respect to the principal manufacturing, distribution and office facilities owned or leased by NMHG Wholesale.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS - -------- ----- ------ --------------------------- Berea, Kentucky X Manufacture of forklift trucks Cavite, Phillipines X S-N owned facility for manufacture of component parts for forklift trucks Craigavon, Northern Ireland X Manufacture of forklift trucks Danville, Illinois (1) X Manufacture of forklift trucks, components and service parts Danville, Illinois X Distribution of service parts for both Hyster and Yale forklift trucks Fleet, England X Hyster and Yale forklift truck marketing and sales operations for Europe, the Middle East and Africa Greenville, North Carolina X NMHG Americas division headquarters; Hyster and Yale marketing and sales operations for NMHG Americas; design and manufacture of forklift trucks Irvine, Scotland X NMHG European division headquarters; manufacture of forklift trucks Lenoir, North Carolina X Manufacture of component parts for forklift trucks Masate, Italy X Manufacture of forklift trucks Modena, Italy X Manufacture of forklift trucks Nijmegen, the Netherlands X Design and manufacture of forklift trucks and component parts; distribution of service parts for forklift trucks Obu, Japan X S-N headquarters; manufacture of forklift trucks and component parts; distribution of service parts for forklift trucks Portland, Oregon X Counterbalanced forklift truck development center for design and testing of forklift trucks, prototype equipment and component parts Portland, Oregon X NMHG global headquarters Portland, Oregon X Manufacture of production tooling and prototype units Ramos Arizpe, Mexico X Manufacture of component parts for forklift trucks Sao Paulo, Brazil X Assembly of forklift trucks; distribution of service parts for forklift trucks Shanghai, China X Manufacture of forklift trucks by Shanghai Hyster Joint Venture Sulligent, Alabama X Manufacture of component parts for forklift trucks Sydney, Australia X Distribution of service parts for forklift trucks and staff operations for NMHG Asia-Pacific division
(1) On January 2, 2001, NMHG announced that it would phase-out the use of this manufacturing plant. NMHG currently believes the phase-out will take approximately 12 months. 11 13 2. NMHG RETAIL NMHG Retail, through its subsidiaries, currently operates its owned dealerships from 58 locations. Of these 58 locations, 10 are in the United States, 31 are in Europe and 17 are in Asia-Pacific as shown below: United States: Kentucky (2) Ohio (6) Pennsylvania (1) West Virginia (1) Europe: France (12) Germany (11) Netherlands (1) United Kingdom (7) Asia-Pacific: Australia (16) Singapore (1) Branch locations generally include facilities for displaying equipment, storing rental equipment, servicing equipment, parts storage and sales and administrative offices. NMHG Retail owns four of its branch locations and leases 54 of its locations. Certain of the leases were entered into (or assumed) in connection with acquisitions and many of the lessors under these leases are former owners of businesses that NMHG Retail acquired. NMHG Retail geographic headquarters are shared with NMHG Wholesale in Greenville, North Carolina; Fleet, England; and Sydney, Australia. D. NACCO HOUSEWARES GROUP The following table summarizes certain information with respect to the principal manufacturing, distribution and office facilities owned or leased by HB-PS.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS - -------- ----- ------ --------------------------- El Paso, Texas X Distribution center Glen Allen, Virginia X Corporate headquarters Juarez, Chihuahua, Mexico X Assembly of heat-driven products (two plants); plastic molding facility (one plant) Memphis, Tennessee X Distribution center Picton, Ontario, Canada X Distribution center Southern Pines, North Carolina X Manufacture of commercial products; service center for customer returns; catalog sales center; parts distribution center Toronto, Ontario, Canada X Proctor-Silex Canada sales and administration headquarters Washington, North Carolina X Customer service center Saltillo, Mexico X Manufacture of heat-driven and motor products; plastic molding and metal stamping facility
Sales offices are also leased in several cities in the United States and Canada. KCI currently leases its corporate headquarters building, a warehouse/distribution facility and a retail store in Chillicothe, Ohio. KCI leases the remainder of its retail stores. A typical store is approximately 3,000 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. 12 14 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 Item 401(b) of Regulation S-K. There exists no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was elected. Each executive officer serves until his successor is elected and qualified. 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. 13 15 EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Alfred M. Rankin, Jr. 59 Chairman, President and Chief Executive Officer of NACCO (since prior to 1996) Charles A. Bittenbender 51 Vice President, General Counsel and Secretary of NACCO (since prior to 1996) Kenneth C. Schilling 41 Vice President and Controller of NACCO From June 1996 to May 1997, Controller of (since May 1997) NACCO. From prior to 1996 to May 1996, Manager of Tax and Budgeting of NACCO. J.C. Butler, Jr. 40 Vice President - Corporate Development From June 1996 to May 1997, Manager of and Treasurer of NACCO (since May 1997) Corporate Development and Treasurer of NACCO. From prior to 1996 to May 1996, Manager of Corporate Development of NACCO. Lauren E. Miller 46 Vice President - Consulting Services of From January 1996 to May 1997, Director of NACCO (since May 1997) Internal Consulting of NACCO. Constantine E. Tsipis 42 Assistant General Counsel and Assistant From October 1997 to May 2000, Assistant Secretary of NACCO (since May 2000) General Counsel of NACCO. From December 1996 to October 1997, Associate General Counsel, STERIS Corporation (manufacturer and distributor of medical and sterilizing equipment). From prior to 1996 to December 1996, Corporate Counsel, The Scott Fetzer Company (diversified marketer of products for home, family and industry).
14 16 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES A. NACOAL
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Clifford R. Miercort 61 President and Chief Executive Officer of NACoal (since prior to 1996) Herschell A. Cashion 58 Senior Vice President - Business Development of NACoal (since prior to 1996) Charles B. Friley 59 Senior Vice President - Finance and From prior to 1996 to August 1999, Vice Chief Financial Officer of NACoal President and Chief Financial Officer of (since August 1999) NACoal. Thomas A. Koza 54 Vice President - Law and Administration, and Secretary of NACoal (since prior to 1996) Clark A. Moseley 49 Vice President - Engineering of NACoal From prior to 1996 to June 1997, Manager, (since June 1997) Engineering and Project Development, NACoal. K. Donald Grischow 53 Controller and Treasurer of NACoal (since prior to 1996)
15 17 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES B. NMHG
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Reginald R. Eklund 60 President and Chief Executive Officer of NMHG (since prior to 1996) Michael P. Brogan 51 Senior Vice President, Product From May 1999 to June 2000, Vice Development and Procurement of NMHG President, Warehouse Product Strategy of (since June 2000) NMHG. From prior to 1996 to May 1999, Managing Director of NACCO Materials Handling S.R.L. (Italy). Ron J. Leptich 57 Vice President, Engineering and Big From June 1996 to October 1997, Vice Trucks of NMHG (since October 1997) President, Engineering and Big Trucks, Worldwide of NMHG. From prior to 1996 to June 1996, Vice President, Engineering, Worldwide of NMHG. Geoffrey D. Lewis 43 Vice President, Corporate Development, From prior to 1996 to June 1999, Vice General Counsel and Secretary of NMHG President, General Counsel and Secretary (since June 1999) of NMHG. Jeffrey C. Mattern 48 Treasurer of NMHG (since prior to 1996) William C. Maxwell 54 Vice President, Finance and Chief From prior to 1996 to August 1996, Vice Financial Officer of NMHG (since August President Finance - Europe of NMHG. 1996) Frank G. Muller 59 Vice President of NMHG; President, NMHG Americas (since prior to 1996) Ronald D. Muller 54 Vice President, Manufacturing Quality From August 1998 to December 2000, Vice and IT Strategy of NMHG (since December President, Operations Strategy & 2000) Counterbalanced Products of NMHG. From August 1996 to August 1998, Vice President, Manufacturing and Information Services, Worldwide of NMHG. From prior to 1996 to August 1996, Vice President, Manufacturing and Component Strategy, Worldwide of NMHG. Victoria L. Rickey 48 Vice President of NMHG; Managing Director, NMHG Europe, Africa and Middle East (since prior to 1996) Edward W. Ryan 62 Vice President, Marketing of NMHG From prior to 1996 to November 1996, Vice (since prior to 1996); President, NMHG President, Counterbalanced Trucks, Asia-Pacific, China and Japan (since Worldwide of NMHG. November 1996) Ray C. Ulmer 37 Controller of NMHG (since December 2000) From April 1997 to December 2000, Director of Financial Planning and Analysis, NMHG. From prior to 1996 to April 1997, Plant Controller - Greenville.
16 18 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES C. NACCO HOUSEWARES GROUP 1. HB-PS
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Michael J. Morecroft 58 President and Chief Executive Officer From January 1997 to January 2001, Senior of HB-PS (since January 2001) Vice President - Engineering/Product Development of HB-PS. From prior to 1996 to December 1996, Vice President, Engineering/Product Development of HB-PS. Keith B. Burns 44 Senior Vice President - Engineering and From April 1999 to March 2001, Vice New Product Development of HB-PS (since President, Purchasing of HB-PS. From March 2001) November 1998 to April 1999, Director of Product Engineering of HB-PS. From prior to 1996 to October 1998, Manager, Product Engineering of HB-PS. Daniel J. Crose 52 Senior Vice President - Operations of From January 2000 to January 2001, Vice HB-PS (since January 2001) President - Manufacturing of HB-PS. From May 1998 to January 2000, Vice President and General Manager, Mexican Operations, Magnetek, Inc. (electronics manufacturer). From November 1997 to April 1998, Vice President and General Manager, Chris-Craft Boats, a division of Outboard Marine Corp. (outboard marine engines and boat manufacturer). From August 1996 to October 1997, Vice President, Manufacturing, Outboard Marine Corp. From April 1996 to July 1996, Director, International Manufacturing, Outboard Marine Corp. From prior to 1996 to April 1996, Vice President and General Manager, Marine Power Products (outboard marine engines and boat accessories). Charles B. Hoyt 53 Senior Vice President - Finance and From prior to 1996 to January 1997, Vice Chief Financial Officer of HB-PS (since President - Finance and Chief Financial January 1997) Officer of HB-PS. Judith B. McBee 53 Senior Vice President - Marketing of From prior to 1996 to December 1996, HB-PS (since January 1997) Executive Vice President - Marketing of HB-PS. Paul C. Smith 54 Senior Vice President - Sales of HB-PS From prior to 1996 to January 1996, Senior (since prior to 1996) Vice President - Sales of HB-PS. George P. Manson, Jr. 47 Vice President, General Counsel and From prior to 1996 to July 1996, Corporate Secretary of HB-PS (since July 1996) Counsel of American Home Products Corp. (health care and consumer products manufacturer). James H. Taylor 43 Vice President and Treasurer of HB-PS (since prior to 1996)
17 19 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES C. NACCO HOUSEWARES GROUP (CONT.) 2. KCI
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Randolph J. Gawelek 53 President and Chief Executive Officer From March 1999 to August 1999, President, of KCI (since August 1999). Secretary and Treasurer of KCI. From December 1998 to March 1999, Executive Vice President, Secretary and Treasurer of KCI. From prior to 1996 to December 1998, Executive Vice President and Secretary of KCI.
18 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this Item 5 is set forth on page 42 of the 2000 Annual Report under the heading "Market For NACCO Industries, Inc. Common Stock and Related Security Holders' Matters," which information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this Item 6 with respect to selected financial data is set forth on page 1 of the 2000 Annual Report under the heading "Selected Financial and Operating Data," which information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item 7 is set forth on pages 24 through 42 of the 2000 Annual Report under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," which information is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item 7A is set forth on pages 41 and 42 of the 2000 Annual Report under the heading "Quantitative and Qualitative Disclosures About Market Risk," which information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item 8 is set forth on pages 43 through 69 of the 2000 Annual Report, which information is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Directors of the Company will be set forth in the 2001 Proxy Statement under the heading "Business to be Transacted -- 1. Election of Directors," which information is incorporated herein by reference. The information set forth in the 2001 Proxy Statement under the subheadings "-- Report of the Audit Review Committee," "-- Report of the Compensation Committee on Executive Compensation" and "-- Stock Price Performance Presentation" is not incorporated herein by reference. Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors, executive officers, and holders of more than ten percent of the Company's equity securities will be set forth in the 2001 Proxy Statement under the heading "Section 16(a) Beneficial Ownership Reporting Compliance," which information is incorporated herein by reference. Information regarding the executive officers of the Company is included in this Annual Report on Form 10-K 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 will be set forth in the 2001 Proxy Statement under the heading "Business to be Transacted -- 1. Election of Directors" under the subheadings "-- Compensation of Directors," "-- Compensation of Executive Officers," "-- Stock Option Grants," "-- Long-Term Incentive Plans," "-- Compensation Committee Interlocks and Insider Participation" and "-- Pension Plans," which information is incorporated herein by reference. The information set forth in the 2001 Proxy Statement under the subheadings "-- Report of the Audit Review Committee," "-- Report of the Compensation Committee on Executive Compensation" and "-- Stock Price Performance Presentation" is not 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 will be set forth in the 2001 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. 19 21 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to certain relationships and related transactions will be set forth in the 2001 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. 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 did not file any current reports on Form 8-K during the fourth quarter of 2000. (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-3 of this Annual Report on Form 10-K. 20 22 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NACCO Industries, Inc. By: /s/ Kenneth C. Schilling ---------------------------------- Kenneth C. Schilling Vice President and Controller (principal financial and accounting officer) March 30, 2001 21 23 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. /s/ Alfred M. Rankin, Jr. Chairman, President and March 30, 2001 - -------------------------------------- Chief Executive Officer (principal Alfred M. Rankin, Jr. executive officer), Director /s/ Kenneth C. Schilling Vice President and Controller March 30, 2001 - -------------------------------------- (principal financial and accounting Kenneth C. Schilling officer) * Owsley Brown II Director March 30, 2001 - -------------------------------------- Owsley Brown II * Robert M. Gates Director March 30, 2001 - -------------------------------------- Robert M. Gates * Leon J. Hendrix, Jr. Director March 30, 2001 - -------------------------------------- Leon J. Hendrix, Jr. * David H. Hoag Director March 30, 2001 - -------------------------------------- David H. Hoag * Dennis W. LaBarre Director March 30, 2001 - -------------------------------------- Dennis W. LaBarre * Richard de J. Osborne Director March 30, 2001 - -------------------------------------- Richard de J. Osborne * Ian M. Ross Director March 30, 2001 - -------------------------------------- Ian M. Ross * Britton T. Taplin Director March 30, 2001 - -------------------------------------- Britton T. Taplin * David F. Taplin Director March 30, 2001 - -------------------------------------- David F. Taplin * John F. Turben Director March 30, 2001 - -------------------------------------- John F. Turben
*Kenneth C. Schilling, 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 directors of the Company pursuant to a Power of Attorney executed by such persons and filed with the Securities and Exchange Commission.
/s/ Kenneth C. Schilling March 30, 2001 - -------------------------------------- Kenneth C. Schilling, Attorney-in-Fact
22 24 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, 2000 NACCO INDUSTRIES, INC. MAYFIELD HEIGHTS, OHIO F-1 25 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 incorporated by reference in Item 8 beginning at page 43 of the 2000 Annual Report: Consolidated Statements of Income and Comprehensive Income--Year ended December 31, 2000, 1999 and 1998. Consolidated Balance Sheets--December 31, 2000 and December 31, 1999. Consolidated Statements of Cash Flows--Year ended December 31, 2000, 1999 and 1998. Consolidated Statements of Stockholders' Equity--Year ended December 31, 2000, 1999 and 1998. Notes to Consolidated Financial Statements. NACCO Industries, Inc. Report of Management. Report of Independent Public Accountants--Year ended December 31, 2000, 1999 and 1998. The following consolidated financial statement schedules of NACCO Industries, Inc. and Subsidiaries are included in Item 14(d): Schedule I -- Condensed Financial Information of the Parent Schedule II -- Valuation and Qualifying Accounts 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 26 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of NACCO Industries, Inc.: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in NACCO Industries, Inc.'s annual report to stockholders, incorporated by reference in this Form 10-K, and have issued our report thereon dated February 13, 2001. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index 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 consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated 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 consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP Cleveland, Ohio February 13, 2001 F-3 27 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY CONDENSED BALANCE SHEETS
Year ended December 31 -------------------------------- 2000 1999 ------------- ------------- (In millions) Current assets $ 0.1 $ 0.2 Current intercompany accounts receivable, net - 0.4 Other assets 0.4 0.4 Note receivable from subsidiary 8.4 - Investment in subsidiaries NMHG 463.0 468.7 Housewares 170.9 163.9 NACoal 31.2 23.2 Bellaire 2.2 0.5 ------------- ------------- 667.3 656.3 Property, plant and equipment, net 0.4 1.2 Deferred income taxes 1.1 20.6 ------------- ------------- Total Assets $ 677.7 $ 679.1 ============= ============= Current liabilities $ 9.3 $ 8.5 Current intercompany accounts payable, net 3.8 - Reserve for future interest on UMWA obligation - 55.3 Note payable to Bellaire 50.3 36.0 Notes payable to other subsidiaries 3.0 12.7 Deferred income taxes and other 4.9 4.4 Stockholders' equity 606.4 562.2 ------------- ------------- Total Liabilities and Stockholders' Equity $ 677.7 $ 679.1 ============= =============
See Notes to Parent Company Financial Statements. F-4 28 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY STATEMENTS OF INCOME
Year ended December 31 --------------------------------------- 2000 1999 1998 ----------- ----------- ------------ (In millions) Income (expense): Intercompany interest expense $ (0.2) $ (0.7) $ (1.0) Other - net 10.1 (2.6) 0.9 ----------- ----------- ------------ 9.9 (3.3) (0.1) Administrative and general expenses 11.6 8.9 10.5 ----------- ----------- ------------ Loss before income taxes (1.7) (12.2) (10.6) Income tax benefit (0.6) (4.6) (4.2) ----------- ----------- ------------ Net loss before extraordinary gain and equity in earnings of subsidiaries (1.1) (7.6) (6.4) Extraordinary gain 21.0 - - ----------- ----------- ------------ Net income (loss) before equity in earnings of subsidiaries 19.9 (7.6) (6.4) Equity in earnings of subsidiaries 47.8 60.7 108.7 ----------- ----------- ------------ Net income $ 67.7 $ 53.1 $ 102.3 =========== =========== ============
See Notes to Parent Company Financial Statements. F-5 29 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY STATEMENTS OF CASH FLOWS
Year ended December 31 ------------------------------------------- 2000 1999 1998 ------------- ------------ ------------ OPERATING ACTIVITIES Net income $ 67.7 $ 53.1 $ 102.3 Equity in earnings of subsidiaries (47.8) (60.7) (108.7) ------------- ------------ ------------ Parent company only net income (loss) 19.9 (7.6) (6.4) Extraordinary gain (21.0) - - Deferred income taxes 0.7 1.2 (0.6) Income taxes net of intercompany tax payments 1.0 (1.4) (6.8) Working capital changes 0.3 (0.3) 3.4 Changes in current intercompany amounts 4.2 2.6 7.9 Changes in reserve for future interest on UMWA obligation (1.6) (1.8) (2.1) Items of income or expense not requiring cash outlays (0.3) 0.4 0.4 ------------- ------------ ------------ Net cash used for operating activities 3.2 (6.9) (4.2) INVESTING ACTIVITIES Dividends and advances received from subsidiaries 1.6 13.9 15.4 Note payable to Bellaire 0.4 (2.4) (0.8) Expenditures for property, plant and equipment (0.3) (0.1) (0.1) Proceeds from the sale of property, plant and equipment 1.4 - - ------------- ------------ ------------ Net cash provided by investing activities 3.1 11.4 14.5 FINANCING ACTIVITIES Cash dividends paid (7.2) (7.0) (6.6) Purchases of treasury stock - - (4.7) Treasury stock sales under stock option and Directors' compensation plans - net 0.9 2.5 1.0 ------------- ------------ ------------ Net cash used for financing activities (6.3) (4.5) (10.3) ------------- ------------ ------------ CASH AND CASH EQUIVALENTS Increase (decrease) for the period - - - Balance at the beginning of the period - - - ------------- ------------ ------------ Balance at the end of the period $ - $ - $ - ============= ============ ============
See Notes to Parent Company Financial Statements. F-6 30 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 The Notes to Consolidated Financial Statements, incorporated by reference 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 $19.7 million in 2000, $16.6 million in 1999 and $22.6 million in 1998. NOTE C - UNRESTRICTED CASH The amount of unrestricted cash available to NACCO, included in Investment in subsidiaries was $30.7 million at December 31, 2000. NOTE D - EXTRAORDINARY GAIN A portion of the extraordinary gain relating to the reversal of the accrual for the obligation to the United Mine Workers of America Combined Benefit Fund arising as a result of the Coal Industry Retiree Health Benefit Act of 1992 as discussed in Note 4 to the Consolidated Financial Statements was recorded on the books of the Parent Company. The amount recorded by the Parent Company of $21.0 million, net of $11.3 million in taxes, combined with the amount recorded by Bellaire Corporation of $8.9 million, net of $4.8 million in taxes, equals the total extraordinary gain of $29.9 million, net of $16.1 million in taxes, recognized by the Company. F-7 31 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- --------------------------------------------------------------------------------------------------------------------------- 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 millions) 2000 Reserves deducted from asset accounts: Allowance for doubtful accounts $ 7.4 $ 1.7 $ 0.2 (C) $ 0.7 (A) $ 8.6 Allowance for discounts, adjustments and returns 9.3 21.6 - 22.7 (B) 8.2 Reserve for losses on inventory 22.9 3.9 0.8 (C) 5.6 (A) 22.0 Valuation allowance against deferred tax assets 7.9 (3.1) (0.2) (C) - 4.6 1999 Reserves deducted from asset accounts: Allowance for doubtful accounts $ 7.8 $ 2.2 $ 0.2 (C) $ 2.8 (A) $ 7.4 Allowance for discounts, adjustments and returns 7.8 23.1 - 21.6 (B) 9.3 Reserve for losses on inventory 21.5 8.6 (0.4) (C) 6.8 (A) 22.9 Valuation allowance against deferred tax assets 6.7 1.2 - - 7.9 1998 Reserves deducted from asset accounts: Allowance for doubtful accounts $ 6.3 $ 2.5 $ 0.1 (C) $ 1.1 (A) $ 7.8 Allowance for discounts, adjustments and returns 7.8 17.4 - 17.4 (B) 7.8 Reserve for losses on inventory 15.8 7.2 0.5 (C) 2.0 (A) 21.5 Valuation allowance against deferred tax assets 5.9 0.8 - - 6.7
Note (A) - Write-offs, 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-8 32 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) Amendment No. 1 to the Mortgage and Security Agreement, dated as of December 15, 1993, between Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and United Power Association (collectively as Mortgagee) is incorporated by reference to Exhibit 4(iii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. (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 Amendment No. 1 to 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. (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 Amendment No. 1 to 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 Amendment No. 2 to 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. (viii) Amendment to Stockholders' Agreement, dated November 14, 1996, adding CTR Family Associates, L.P. as a Participating Stockholder, among the signatories thereto, the Company, and Key Bank, N.A. (successor to Ameritrust Company National Association), as depository, is incorporated herein by reference to Amendment No. 3 to the Schedule 13D filed on November 26, 1996, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (ix) Amendment to Stockholders' Agreement, dated as of November 14, 1996, adding Rankin Mangement, Inc. as a Participating Stockholder, among the signatories thereto, the Company, and Key Bank, N.A. (successor to Ameritrust Company National Association), as depository, is incorporated herein by reference to Amendment No. 3 to the Schedule 13D filed on November 26, 1996, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (x) Amendment to Stockholders' Agreement, dated as of April 9, 1998, by and among KeyCorp Shareholder Services, Inc., the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 6 to the Schedule 13D filed on March 25, 1999, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xi) Amendment to Stockholders' Agreement, dated as of December 26, 1998, by and among KeyCorp Shareholder Services, Inc., the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 6 to the Schedule 13D filed on March 25, 1999, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. X-1 33 (xii) Amendment to Stockholders' Agreement, dated as of November 30, 1999, by and among First Chicago Trust Company of New York, the Company and the Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 7 to the Schedule 13D filed on March 30, 2000, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xiii) Amendment to Stockholders' Agreement, dated as of November 30, 1999, by and among First Chicago Trust Company of New York, the Company and the Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 7 to the Schedule 13D filed on March 30, 2000, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xiv) Amendment to Stockholders' Agreement, dated as of March 30, 2000, by and among First Chicago Trust Company of New York, the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 7 to the Schedule 13D filed on March 30, 2000, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xv) Amendment to Stockholders' Agreement, dated as of October 31, 2000, by and among First Chicago Trust Company of New York, the Company and the Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 8 to the Schedule 13D filed on February 14, 2001, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xvi) Amendment to Stockholders' Agreement, dated as of October 31, 2000, by and among National City Bank (Cleveland), the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 8 to the Schedule 13D filed on February 14, 2001, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xvii) Amendment to Stockholders' Agreement, dated as of February 14, 2001, by and among National City Bank (Cleveland), the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 8 to the Schedule 13D filed on February 14, 2001, 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 restated as of July 17, 1986) is incorporated X-2 34 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) The Retirement Benefit Plan for Alfred M. Rankin, Jr., effective as of January 1, 1994 is incorporated herein by reference to Exhibit 10 (ix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. *(x) Amendment No. 1, dated as of March 15, 1995, to the Retirement Benefit Plan for Alfred M. Rankin, Jr. is incorporated herein by reference to Exhibit 10 (x) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. *(xi) Instrument of Adoption and Merger for NACCO Industries, Inc. for the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective October 1, 1994) dated December 30, 1994, is incorporated herein by reference to Exhibit 10(xxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. *(xii) Instrument of Withdrawal and Transfer of Liabilities from The North American Coal Corporation Deferred Compensation Plan for Management Employees, effective as of December 31, 1994, is incorporated herein by reference to Exhibit 10(xxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. *(xiii) NACCO Industries, Inc. Annual Incentive Compensation Plan, effective as of January 1, 2000, is incorporated herein by reference to as Exhibit 10(xx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(xiv) NACCO Industries, Inc. Supplemental Annual Incentive Compensation Plan, effective as of January 1, 1996, is incorporated herein by reference to Exhibit 10(xiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. *(xv) NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan, amended and restated as of January 1, 1996, is attached incorporated herein by reference to Exhibit 10(xv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File Number 1-9172. (xvi) 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 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. (xvii) Intentionally left blank. *(xviii) 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. *(xix) Amendment No. 2, dated June 30, 1995, to the Retirement Benefit Plan for Alfred M. Rankin, Jr. (as amended and restated effective January 1, 1994) is incorporated herein by reference to Exhibit 10 (clxxi) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, Commission File Number 1-9172. *(xx) NACCO Industries, Inc. Annual Incentive Compensation Plan, effective as of January 1, 2001, is attached hereto as Exhibit 10(xx). *(xxi) Amendment No. 3, dated as of September 13, 1999, to the Retirement Benefit Plan for Alfred M. Rankin, Jr. (as amended and restated effective January 1, 1994) is incorporated herein by reference to Exhibit 10(xxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(xxii) Amendment No. 4, dated as of June 23, 2000, to the Retirement Benefit Plan for Alfred M. Rankin, Jr. (as amended and restated effective January 1, 1994) is attached hereto as Exhibit 10(xxii). *(xxiii) The NACCO Industries, Inc. Unfunded Benefit Plan (effective September 1, 2000) is attached hereto as Exhibit 10(xxiii). (xxiv) - (xxx) Intentionally left blank. *(xxxi) The North American Coal Annual Incentive Plan, effective as of January 1, 2000, is incorporated herein by reference to Exhibit 10(xlv) to the Company's Annual Report on Form 10-K for the year ended December 31, 1999, Commission File Number 1-9172. *(xxxii) Instrument of Merger, Amendment and Transfer of Sponsorship of Benefit Plans, effective as of August 31, 1994, is incorporated herein by reference to Exhibit 10(xxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. X-3 35 (xxxiii) 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. (xxxiv) 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. *(xxxv) 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. *(xxxvi) Amendment No. 1 to The North American Coal Corporation Value Appreciation Plan, dated as of December 14, 1994, is incorporated herein by reference to Exhibit 10(xcix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. (xxxvii) Purchase and Sale Agreement, dated October 11, 2000, by and among Phillips Petroleum Company, Phillips Coal Company, The North American Coal Corporation, Oxbow Property Company L.L.C. and Red Hills Property Company L.L.C. is attached hereto as Exhibit 10(xxxvii). (xxxviii) 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 Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(cxxxxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 1-9172. (xxxix) Amendment No. 2 to the Credit Agreement, dated as of September, 1995, among The North American Coal Corporation and the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(xxxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. *(xl) The North American Coal Corporation Supplemental Retirement Benefit Plan, as amended and restated effective September 1, 1994, is incorporated by reference to Exhibit 10 (clxv) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, Commission File Number 1- 9172. *(xli) The North American Coal Corporation Deferred Compensation Plan for Management Employees (as amended and restated effective January 1, 1996), is incorporated herein by reference to Exhibit 10(xli) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. *(xlii) Amendment No. 1, dated December 1, 1995, to The North American Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated effective September 1, 1994), effective as of December 31, 1994, is incorporated herein by reference to Exhibit 10 (xlii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. (xliii) Amendment No. 3 to the Credit Agreement, dated as of September 16, 1996, among The North American Coal Corporation and the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(xliii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File Number 1-9172. *(xliv) Amendment No. 1, dated as of June 23, 2000, to The North American Coal Corporation Deferred Compensation Plan for Management Employees (as amended and restated effective January 1, 1999) is attached hereto as Exhibit 10(xliv). *(xlv) The North American Coal Annual Incentive Plan, effective as of January 1, 2001, is attached hereto as Exhibit 10(xlv). (xlvi) Waiver Agreement, dated November 15, 1996, by and among Morgan Guaranty Trust Company, Citibank, N.A., Wells Fargo (Texas), N.A., Key Bank National Association and The North American Coal Corporation is incorporated herein by reference to Exhibit 10(xlvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File Number 1-9172. (xlvii) Amendment No. 4 to the Credit Agreement, dated as of July 29, 1997, among The North American Coal Corporation, the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(xlvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. (xlviii) Assignment and Assumption Agreement, dated as of August 22, 1997, among The North American Coal Corporation, the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as X-4 36 Agent, is incorporated herein by reference to Exhibit 10(xlviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. *(xlix) The North American Coal Corporation Deferred Compensation Plan for Management Employees, dated December 29, 1998 (as amended and restated effective January 1, 1999) is incorporated herein by reference to Exhibit 10(xlix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(l) Amendment No. 2, dated October 1, 1998, to The North American Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated effective September 1, 1994), effective as of July 15, 1998, is incorporated herein by reference to Exhibit 10(l) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(li) Amendment No. 3, dated October 30, 1998, to The North American Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated effective September 1, 1994), effective as of July 15, 1998, is incorporated herein by reference to Exhibit 10(li) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(lii) Amendment No. 4, dated December 8, 1999, to The North American Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated effective September 1, 1994), effective as of January 1, 2000, is incorporated herein by reference to Exhibit 10(lii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(liii) The North American Coal Corporation Value Appreciation Plan For Years 2000 to 2009, effective as of January 1, 2000, is attached hereto as Exhibit 10(liii). (liv) Credit Agreement, dated as of October 11, 2000, by and among The North American Coal Corporation, the Initial Lenders named therein, Salomon Smith Barney Inc., as Lead Arranger and Book Manager, Keybank National Association, as Syndication Agent, and Citibank N.A., as Agent, is attached hereto as Exhibit 10(liv). *(lv) Amendment No. 1 to the Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan, effective as of January 1, 1994, is incorporated herein by reference to Exhibit 10(lxxxviii) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 33-28812. (lvi) 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). (lvii) 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). *(lviii) NACCO Materials Handling Group, Inc. Annual Incentive Compensation Plan for 2000 is incorporated herein by reference to Exhibit 10(lxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(lix) 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. (lx) Intentionally left blank. (lxi) Agreement and Plan of Merger, dated as of December 20, 1993, between Hyster Company, an Oregon corporation, and Hyster Company, a Delaware corporation, is incorporated herein by reference to Exhibit 10(lxxviii) to Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(lxii) Agreement and Plan of Merger, dated as of December 20, 1993, between Yale Materials Handling Corporation, a Delaware corporation, Hyster Company, a Delaware corporation, and Hyster-Yale Materials Handling, Inc., a Delaware corporation, is incorporated herein by reference to Exhibit 10(lxxix) to Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(lxiii) NACCO Materials Handling Group, Inc. Annual Incentive Plan, effective as of January 1, 2001, is attached hereto as Exhibit 10(lxiii). *(lxiv) NACCO Materials Handling Group, Inc. Senior Executive Long-Term Incentive Compensation Plan, effective as of January 1, 2000, is attached hereto as Exhibit 10(lxiv). X-5 37 *(lxv) NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan, effective as of January 1, 2000, is attached hereto as Exhibit 10(lxv). (lxvi) Intentionally left blank. *(lxvii) Amendment No. 2, effective as of December 31, 1993, to the Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10 (lxxxxiii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(lxviii) Amendment No. 3, effective as of January 1, 1994, to the Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10 (lxxxxv) to the Hyster-Yale Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, Commission File Number 33-28812. (lxix) Amendment, dated as of January 1, 1994, to the Third Amendment and Restated Operating Agreement dated as of November 7, 1991, between NACCO Materials Handling Group and AT&T Commercial Finance Corporation is incorporated herein by reference to Exhibit 10(c) to the Hyster-Yale Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, Commission File Number 33-28812. *(lxx) 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. (lxxi) Intentionally left blank. (lxxii) Credit Agreement between NACCO Materials Handling Group, Inc. and Morgan Guaranty Trust company of New York, as Agent, and the other banks listed thereto, dated February 28, 1995, is incorporated by reference herein to Exhibit 10(lxxxvii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 33-28812. *(lxxiii) NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective as of September 1, 2000) is attached hereto as Exhibit 10(lxxiii). (lxxiv) Intentionally left blank. (lxxv) Amended and Restated Credit Agreement, dated as of June 4, 1996, among NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-Arrangers and Co-Agents listed on the signature page thereto and Morgan Guaranty Trust Company of New York, as Agent, is incorporated by reference to Exhibit 10(lxxv) to the Company's Quarterly Statement on Form 10-Q for the quarter ended June 30, 1996, Commission File Number 1-9172. (lxxvi) Amendment, dated as of December 16, 1996, to the Amended and Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-Arrangers and Co-Agents listed on the signature page thereto and Morgan Guaranty Trust Company of New York, as 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, 1996, Commission File Number 1-9172. (lxxvii) Amendment No. 2, dated as of March 26, 1997, to the Amended and Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-arrangers and Co-agents listed on the signature page thereto and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(lxxviii) to the Company's Quarterly Statement on Form 10-Q for the quarter ended March 31, 1997, Commission File Number 1-9172. (lxxviii) Amendment No. 3, dated as of May 19, 1997, to the Amended and Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-arrangers and Co-agents listed on the signature page thereto and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(lxxviii) to the Company's Quarterly Statement on Form 10-Q for the quarter ended June 30, 1997, Commission File Number 1-9172. (lxxix) -(lxxxii) Intentionally left blank. *(lxxxiii) Amendment No. 4, dated as of October 8,1999, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan 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, 1999, Commission File Number 1-9172. *(lxxxiv) Amendment No. 5, dated as of December 20,1999, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan 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, 1999, Commission File Number 1-9172. X-6 38 *(lxxxv) Amendment No. 6, dated as of March 9, 2000, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is attached hereto as Exhibit 10(lxxxv) *(lxxxvi) Amendment No. 7, dated as of June 23, 2000, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is attached hereto as Exhibit 10(lxxxvi) (lxxxvii) 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. (lxxxviii) 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. (lxxxix) - (xci) Intentionally left blank. (xcii) 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(cx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xciii) 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(cxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xciv) 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(cxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcv) 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(cxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcvi) 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(cxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcvii) 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(cxv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcviii) 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(cxvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcix) 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(cxvii) to the Company s Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (c) 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(cxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (ci) 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(cxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. X-7 39 (cii) 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(cxx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,1990, Commission File Number 1-9172. (ciii) 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(cxxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (civ) 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(cxxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. *(cv) The Hamilton Beach/Proctor-Silex, Inc. 2000 Annual Incentive Compensation Plan is incorporated herein by reference to Exhibit 10(cxx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(cvi) Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan, effective January 1, 1993, is incorporated by reference to Exhibit 10(cxxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. (cvii) 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(cxxv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (cviii) 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(cxxvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (cvix) 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 incorporated herein by reference to Exhibit (cxxxvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 1-9172. (cx) Amended and Restated Credit Agreement, dated as of May 10, 1994 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 incorporated herein by reference to as Exhibit 10 (cxxxviii) to the NACCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, Commission File Number 1-9172. (cxi) Confirmation Agreement, dated May 10, 1994, among Hamilton Beach/Proctor-Silex, Inc., Housewares Holding Company, Precis [521] Ltd., HB-PS Holding Company, Glen Dimplex, Glen Electric, Ltd., the banks named on the signatory pages, the Chase Manhattan Bank and the Chase Manhattan Bank of Canada is incorporated herein by reference to Exhibit 10 (cxxix) to the NACCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended on June 30, 1994, Commission File Number 1-9172. (cxii) 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(cxxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (cxiii) Waiver Agreement, dated January 16, 1996, 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 Chase Manhattan Bank is incorporated herein by reference to Exhibit 10 (cxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. (cxiv) Amended and Restated Credit Agreement, dated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex, Inc., Proctor-Silex S.A. de C.V., the banks named on the signatory pages and The Chase Manhattan Bank is incorporated herein by reference to Exhibit 10(cxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. (cxv) Amendment No. 1, dated as of March 29, 1996, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc. Proctor-Silex Canada, Inc., Proctor-Silex S.A de C.V., as Borrowers, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as X-8 40 Canadian Agent, is incorporated by reference herein to Exhibit 10 (xvii) on the Company's Quarterly Statement on Form 10-Q for the quarter ended June 30, 1996, Commission File Number 1-9172. (cxvi) Amendment No. 2, dated as of October 4, 1996, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Borrowers, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by reference to Exhibit 10(cxviii) to the Company's Quarterly Statement for the quarter ended September 30, 1996, Commission File Number 1-9172. (cxvii) Amendment No. 3, dated as of April 14, 1997, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Borrowers, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by reference to Exhibit 10(cxviii) to the Company's Quarterly Statement for the quarter ended June 30, 1997, Commission File Number 1-9172. (cxviii) Pledge Agreement, dated as of November 30, 1995, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association), is incorporated herein by reference to Exhibit 10(cxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. (cxix) Pledge Agreement re: 66% of PST Stock, dated as of November 30, 1995, between HB/PS El Paso, Inc. and The Chase Manhattan Bank (National Association), is incorporated herein by reference to Exhibit 10(cxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. *(cxx) The Hamilton Beach/Proctor-Silex, Inc. 2001 Annual Incentive Plan is attached hereto as Exhibit 10(cxx). (cxxi) Amendment No. 4, dated as of April 22, 1998, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by reference to Exhibit 10(cxxi) to the Company's Quarterly Statement for the quarter ended March 31, 1998, Commission File Number 1-9172. (cxxii) Amendment No. 5, dated as of June 10, 1998, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by reference to Exhibit 10(cxxii) to the Company's Quarterly Statement for the quarter ended June 30, 1998, Commission File Number 1-9172. (cxxiii) Amendment No. 6, dated as of December 8, 1998, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks signatory thereto and The Chase Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.)(the Existing U.S. Agent), KeyBank National Association (the Successor U.S. Agent), The Chase Manhattan Bank of Canada(the Existing Canadian Agent) and The Bank of Nova Scotia (the Successor Canadian Agent), is incorporated herein by reference to Exhibit 10(cxxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(cxxiv) Amendment No. 1, dated December 12, 1999, to the Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10(cxxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(cxxv) The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and Restated Effective November 1, 2000) is attached hereto as Exhibit 10(cxxv). (13) Portions of the Company's 2000 Annual Report to security holders that are incorporated by reference into this Form 10-K are attached hereto as Exhibit 13. (21) Subsidiaries. A list of the subsidiaries of the Company is attached hereto as Exhibit 21. (23) Consents of experts and counsel. (i) The consent of Arthur Andersen LLP, independent accountant, is attached hereto as Exhibit 23(i). X-9 41 (24) Powers of Attorney. (i) A copy of a power of attorney for Owsley Brown II is attached hereto as Exhibit 24(i). (ii) A copy of a power of attorney for Robert M. Gates is attached hereto as Exhibit 24(ii). (iii)A copy of a power of attorney for Leon J. Hendrix, Jr. is attached hereto as Exhibit 24(iii). (iv) A copy of a power of attorney for David H. Hoag is attached hereto as Exhibit 24(iv). (v) A copy of a power of attorney for Dennis W. LaBarre is attached hereto as Exhibit 24(v). (vi) A copy of a power of attorney for Richard de J. Osborne is attached hereto as Exhibit 24(vi). (vii) A copy of a power of attorney for Ian M. Ross is attached hereto as Exhibit 24(vii). (viii)A copy of a power of attorney for Britton T. Taplin is attached hereto as Exhibit 24(viii). (ix) A copy of a power of attorney for David F. Taplin is attached hereto as Exhibit 24(ix). (x) A copy of a power of attorney for John F. Turben is attached hereto as Exhibit 24(x). (99) Other exhibits not required to otherwise be filed.** (i) Unaudited Consolidating Statement of Income and Comprehensive Income of NACCO Industries, Inc. for the Year Ended December 31, 2000 is attached hereto as Exhibit 99(i). (ii) Unaudited Consolidating Balance Sheet of NACCO Industries, Inc. as of December 31, 2000 is attached hereto as Exhibit 99(ii). (iii)Unaudited Consolidating Statement of Cash Flows of NACCO Industries, Inc. for the Year Ended December 31, 2000 is attached hereto as Exhibit 99(iii). (iv) Unaudited Consolidating Statement of Stockholders' Equity of NACCO Industries, Inc. for the Year Ended December 31, 2000 is attached hereto as Exhibit 99(iv). *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. **Consolidating Financial Statements of NACCO Industries, Inc. are not required disclosures and are included only for informational purposes. These statements have not been audited by independent public accountants and are presented only for purposes of additional analysis and not as a presentation of the financial results or position of each component of the consolidated group, and should be read accordingly. X-10 EX-10.XX 2 l87125bex10-xx.txt EXHIBIT 10(XX) 1 Exhibit 10(xx) ================================================================================ NACCO INDUSTRIES, INC. 2001 ANNUAL INCENTIVE COMPENSATION PLAN ================================================================================ 1. PURPOSE OF THE PLAN The purpose of the NACCO Industries, Inc. 2001 Annual Incentive Compensation Plan (the "Plan") is to further the profits and growth of NACCO Industries, Inc. (the "Company") by enabling the Company to attract and retain key employees of the Company by offering annual incentive compensation to those key employees who will be in a position to help the Company to meet its financial and business objectives. 2. DEFINITIONS (a) "Award" means cash paid to a Participant under the Plan for the Award Term in an amount determined in accordance with Section 4. (b) "Award Term" means the period from January 1, 2001 through December 31, 2001. (c) "Base Amount" means for any Participant a dollar amount, which shall be equal to the salary midpoint for the Salary Points assigned to the Participant by the Committee for the Award Term multiplied by 60% of the short-term incentive 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 Term. (d) "Committee" means the Nominating, Organization and Compensation Committee of the Company's Board of Directors or any other committee appointed by the Company's Board of Directors to administer this Plan in accordance with Section 3, so long as any such committee consists of not less than two directors of the Company and so long as each member of the Committee is not an employee of the Company or any of its subsidiaries. (e) "Participant" means any salaried employee of the Company who in the judgment of the Committee occupies a key position in which his efforts may significantly contribute to the profits or growth of the Company; provided, however, that the Committee may select any employee who is expected to contribute, or who has contributed, significantly to the Company's profitability to participate in the Plan and receive an Award hereunder; and further provided, however, that following the end of the Award Term the Committee may make one or more discretionary Awards to employees of the Company who are not Participants. Directors of the Company who are also employees of the Company are eligible to participate in 2 the Plan. Employees of the Company's subsidiaries shall not be eligible to participate in the Plan. The Committee shall have the power to add Participants at any later date in the Award Term if individuals subsequently become eligible to participate in the Plan. Each Participant shall be notified that he is eligible to receive an Award for such term and the amount of his Base Amount. If a Participant receives a change in Salary Points, salary midpoint and/or short-term incentive compensation target percent, such change and any resulting change in his Base Amount will be reflected on an amended EXHIBIT A. Unless otherwise determined by the Committee, a Participant must be both employed by the Company and a Participant on December 31 of the Award Term, and the amount of any Award to a Participant who was not also employed by the Company and a Participant on the first day of the Award Term shall be not more than the pro-rated amount based upon the number of days actually employed by the Company in the Award Term. Attached hereto as EXHIBIT A is a schedule listing the Participants for the Award Term. (f) "Salary Points" means the salary points assigned to a Participant by the Committee pursuant to the Hay salary point system, or any successor salary point system adopted by the Committee. 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 or paid 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 this Plan. A majority of the Committee shall constitute a quorum, and the action of members of the Committee present at any meeting at which a quorum is present or acts unanimously approved in writing, shall be the act of the Committee. All acts and decisions of the Committee with respect to any questions arising in connection with the administration and interpretation of this Plan, including the severability of any or all of the provisions hereof, shall be conclusive, final and binding upon the Company and all present and former Participants, all other employees of the Company, and their respective descendants, successors and assigns. No member of the Committee shall be liable for any such act or decision made in good faith. 4. AWARDS The Committee may, from time to time and upon such conditions as it may determine, authorize Awards for Participants, which Awards shall be not inconsistent with, and shall be subject to all of the requirements of, the following provisions: (a) PERFORMANCE TARGETS. The Committee shall determine performance target descriptions, weightings and targets for the Award Term, which shall be attached hereto as EXHIBIT B. The Committee 3 shall have the power to add, delete and amend target descriptions, weightings and targets during the Award Term, which shall be reflected on an amended EXHIBIT B. No performance targets used in this Plan shall be used in the Company's Supplemental Annual Incentive Compensation Plan in the same year. (b) AWARDS. Following the end of the Award Term, the Committee shall compare the actual performance against the performance targets for each of the performance target descriptions. Based thereupon, the Committee shall determine the total payout percentage under the Plan (the "Payout Percentage"). The Committee shall then determine the Award for each Participant, which shall be equal to the Participant's Base Amount, multiplied by the Payout Percentage, and further adjusted by such other factors, including an individual performance factor for each Participant, as the Committee shall determine are appropriate; provided, however, that no Award may be made to any Participant which exceeds 150% of his Base Amount. Promptly following the approval of the final Awards, the Company shall pay the amount of such Awards to the Participants in cash, subject to all withholdings and deductions pursuant to Section 5; provided, however, that no Award shall be payable to a Participant except as determined by the Committee. 5. WITHHOLDING TAXES Any Award paid to a Participant under this Plan, shall be subject to standard federal, state and local income tax, social security and other standard withholdings and deductions. 6. AMENDMENT AND TERMINATION The Committee may alter or amend this Plan from time to time or terminate it in its entirety; provided, however, that no such action shall, without the consent of a Participant, affect the rights in an outstanding Award of such Participant. 7. GENERAL PROVISIONS (a) NO RIGHT OF EMPLOYMENT. Neither the adoption or operation of this Plan, nor any document describing or referring to this Plan, or any part thereof, shall confer upon any employee any right to continue in the employ of the Company, or shall in any way affect the right and power of the Company to terminate the employment of any employee at any time with or without assigning a reason therefor to the same extent as the Company might have done if this Plan had not been adopted. (b) GOVERNING LAW. The provisions of this Plan shall be governed by and construed in accordance with the laws of the State of Delaware. 4 (c) MISCELLANEOUS. Headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such headings, numbering and paragraphing shall not in any case be deemed in any way material or relevant to the construction of this Plan or any provisions thereof. The use of the 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. 8. EFFECTIVE DATE This Plan shall become effective as of January 1, 2001. EX-10.XXII 3 l87125bex10-xxii.txt EXHIBIT 10(XXII) 1 Exhibit 10(xxii) AMENDMENT NO. 4 TO THE RETIREMENT BENEFIT PLAN FOR ALFRED M. RANKIN, JR. (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994) NACCO Industries, Inc. hereby adopts this Amendment No. 4 to the Retirement Benefit Plan for Alfred M. Rankin, Jr. (As Amended and Restated Effective January 1, 1994) (the "Plan"), to be effective as of the date on which the Amendment is executed. Words used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 --------- Section 3.3(e) of the Plan is hereby amended in its entirety to read as follows: "(e) Debits for any distributions made from the Account and for any amounts forfeited under Section 5.1(e)." SECTION 2 --------- Section 5.1(e) of the Plan is hereby amended by adding the following new Subsections (e) and (f) to the end thereof, to read as follows: "(e) Withdrawals Subject to a 10% Penalty. (i) The provisions of this Subsection shall apply notwithstanding any other provision of the Plan to the contrary. (ii) While the Participant is an Employee, he may, at any time (and from time to time) elect in writing to receive a withdrawal from the portion of his Account attributable to his Transitional Benefits, plus earnings. (iii) In addition to the amounts described in (ii) above, once the Participant has ceased to be an Employee of the Controlled Group, he may also elect in writing to receive a withdrawal from the portion of his Account attributable to his Opening Account Balance and his Supplemental Profit Sharing Contributions, plus earnings. (iv) If the Participant elects a withdrawal under this Subsection, such withdrawal must include the entire amount attributable to the type of Contributions specified by the Participant, less 10%. Such 10% reduction shall be treated as a forfeiture hereunder and shall immediately be subtracted from the Participant's Account, never to be restored. (f) Payment Restriction. Notwithstanding any provision of the Plan to the contrary, the payment of all or any portion of the amounts payable hereunder will be deferred to the extent that any amount payable, when added to any other compensation received or to be received by the Participant in the same calendar year, would not be deductible by the Employer by reason of section 162(m) of 2 the Internal Revenue Code (the "Code"). The amount to be deferred will equal the amount that otherwise would not be deductible by the Employer by reason of Section 162(m) of the Code, but in no event greater than the total amount otherwise payable hereunder. The deferred amount shall become payable on December 31 of the first succeeding calendar year in which such amount, when added to all other compensation received or to be received by the Participant in such calendar year, would not be non-deductible by the Employer by reason of section 162(m) of the Code. The Nominating, Organization and Compensation Committee of the Board of Directors, in its sole and absolute discretion, shall have the authority to waive this payment restriction (in whole or in part) upon the written request of the participant." EXECUTED this 23rd day of June, 2000. ---- ---- NACCO INDUSTRIES, INC. By: /s/ Charles A. Bittenbender ----------------------------------- Title: Vice President, General Counsel and Secretary 2 EX-10.XXIII 4 l87125bex10-xxiii.txt EXHIBIT 10(XXIII) 1 Exhibit 10 (xxiii) THE NACCO INDUSTRIES, INC. UNFUNDED BENEFIT PLAN (EFFECTIVE SEPTEMBER 1, 2000) 2 NACCO INDUSTRIES INC. UNFUNDED BENEFIT PLAN NACCO Industries, Inc. (the "Company") does hereby establish the NACCO Industries, Inc. Unfunded Benefit Plan on the terms and conditions described hereinafter, effective as of September 1, 2000. Effective as of the close of business on August 31, 2000, this Plan was spun-off from the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan. ARTICLE I --------- PREFACE ------- SECTION 1.2. EFFECTIVE DATE. The effective date of this Plan is September 1, 2000. SECTION 1.3. PURPOSE OF THE PLAN. The purpose of this Plan is to provide for certain Employees the benefits they would have received under the Qualified Plans but for (a) the dollar limitation on Compensation taken into account under the Qualified Plans as a result of Section 401(a)(17) of the Code, (b) the limitations imposed under Section 415 of the Code, and (c) the limitations under Sections 402(g), 401(k)(3) and 401(m) of the Code. SECTION 1.4. GOVERNING LAW. This Plan shall be regulated, construed and administered under the laws of the State of Ohio, except when preempted by federal law. SECTION 1.5. GENDER AND NUMBER. For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural unless otherwise clearly required by the context. ARTICLE II ---------- DEFINITIONS ----------- Except as otherwise provided in this Plan, terms defined in the Profit Sharing Plan as it may be amended from time to time shall have the same meanings when used herein, unless a different meaning is clearly required by the context of this Plan. In addition, the following words and phrases shall have the following respective meanings for purposes of this Plan. SECTION 2.1. ACCOUNT shall mean the record maintained by the Company in accordance with Section 4.1 as the sum of the Participant's Excess Profit Sharing Sub-Account, Excess 401(k) Sub-Account and Excess Matching Sub-Account. SECTION 2.2. ADJUSTED ROE. (a) For purposes of this Section, the following terms shall have the following meanings: (i) "NET INCOME (BEFORE EXTRAORDINARY ITEMS)" is defined as consolidated net income, as defined by generally accepted accounting principles ("GAAP"), for the Company and 3 its subsidiaries for the subject year before extraordinary items, but including any extraordinary items related to refinancings (net of tax); (ii) "AMORTIZATION OF GOODWILL" is defined as the consolidated amortization expense related to the intangible asset goodwill for the Company and its subsidiaries, as applicable for the subject year; (iii) "WEIGHTED AVERAGE STOCKHOLDERS' EQUITY" is calculated by adding the consolidated stockholders' equity for the Company, 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 consolidated 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; and (v) "WEIGHTED AVERAGE UMWA ADJUSTMENT" is calculated by adding the balance in the Obligation to United Mine Workers of America Combined Benefit Fund, net of tax, for NACCO Industries, Inc. at the beginning of the subject year and the end of each month of the subject year and dividing by thirteen. (b) "Adjusted ROE" shall mean the average return on equity of the Company calculated for the applicable time period, based on A divided by B, where: A = Net Income (before extraordinary items) + Amortization of Goodwill; and B = Weighted Average (Stockholders' Equity + Accumulated Amortization of Goodwill + UMWA Adjustment). (c) Adjusted ROE shall be determined at least annually by the Company. SECTION 2.3. BENEFICIARY shall mean the person or persons designated by the Participant as his Beneficiary under this Plan, in accordance with the provisions of Article VIII hereof. SECTION 2.4. COMPANY shall mean NACCO Industries, Inc. or any entity that succeeds NACCO Industries, Inc. by merger, reorganization or otherwise. SECTION 2.5. COMPENSATION shall have the same meaning as under the Profit Sharing Plan, except that (a) Compensation shall be deemed to include (i) the amount of compensation deferred by the Participant under this Plan and (ii) amounts in excess of the limitation imposed by Code Section 401(a)(17) and (b) Compensation shall be deemed to exclude cash compensation which is paid for special perquisites, such as country club dues and company plane allowances. Notwithstanding the foregoing, cash allowances in lieu of general perquisites that are paid to substantially all Participants shall be included in the definition of Compensation hereunder. 2 4 SECTION 2.6. EXCESS RETIREMENT BENEFIT OR BENEFIT shall mean Excess Profit Sharing Benefit, Excess 401(k) Benefit or Excess Matching Benefit(as described in Article III) which is payable to or with respect to a Participant under this Plan. SECTION 2.7. FIXED INCOME FUND shall mean the Stable Asset Fund under the Profit Sharing Plan or any equivalent fixed income fund thereunder which is designated by the NACCO Industries, Inc. Retirement Funds Investment Committee as the successor to the Stable Asset Fund. SECTION 2.8. 401(k) EMPLOYEE shall mean an Employee of the Company who is a Participant in the Profit Sharing Plan who is eligible to receive Before-Tax Contributions and Matching Employer Contributions thereunder. SECTION 2.9. INSOLVENT. For purposes of this Plan, the Company shall be considered Insolvent at such time as it (a) is unable to pay its debts as they mature, or (b) is subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code. SECTION 2.10. PARTICIPANT. (a) For purposes of Section 3.1 of the Plan, the term "Participant" means an Employee who is a Participant in the profit sharing portion of the Profit Sharing Plan (i) whose profit sharing benefit for a Plan Year is limited by the application of Section 401(a)(17) or 415 of the Code and (ii) whose total annual compensation from the Controlled Group for such Plan Year was at least $100,000. (b) For purposes of Sections 3.2 and 3.3 of the Plan, the term "Participant" means a 401(k) Employee (i) who is unable to make all of the Before-Tax Contributions that he has elected to make to the Profit Sharing Plan, or is unable to receive the maximum amount of Matching Employer Contributions under the Profit Sharing Plan because of the limitations of Section 402(g), 401(a)(17), 401(k)(3), or 401(m) of the Code, and (ii) whose total annual compensation from the Controlled Group for the Plan Year in which a deferral election is required is at least $100,000. (c) The term "Participant" shall also include any other person who, as of August 31, 2000, was entitled to receive an Excess Retirement Benefit under the Prior Plan. SECTION 2.11. PLAN shall mean the NACCO Industries, Inc. Unfunded Benefit Plan, as herein set forth or as duly amended. SECTION 2.12. PLAN ADMINISTRATOR shall mean the Company. SECTION 2.13. PLAN YEAR shall mean the calendar year. SECTION 2.14. PRIOR PLAN shall mean for the period from January 1, 1995 through August 31, 2000, the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan and for the period prior to January 1, 1995, the North American Coal Corporation Deferred Compensation Plan for Management Employees. 3 5 SECTION 2.15. PROFIT SHARING EMPLOYEE shall mean an Employee of the Company who is a participant in the Profit Sharing Plan and who is eligible for Profit Sharing Contributions. SECTION 2.16. PROFIT SHARING PLAN shall mean the NACCO Materials Handling Group, Inc. Profit Sharing Plan or any successor thereto. SECTION 2.17. UNFORESEEABLE EMERGENCY shall mean an event which results (or will result) in severe financial hardship to the Participant as a consequence of an unexpected illness or accident or loss of the Participant's property due to casualty or other similar extraordinary or unforeseen circumstances out of the control of the Participant. SECTION 2.18. VALUATION DATE shall mean the last day of each Plan Year and any other date chosen by the Plan Administrator. ARTICLE III ----------- EXCESS RETIREMENT BENEFITS -------------------------- SECTION 3.1. EXCESS PROFIT SHARING BENEFITS. (a) IN GENERAL. The Company shall credit to a Sub-Account (the "Excess Profit Sharing Sub-Account") established for each Participant who is both an Employee and a Profit Sharing Employee, an amount equal to the excess, if any, of (i) the amount of the Employer's Profit Sharing Contribution which would have been made to the profit sharing portion of the Profit Sharing Plan on behalf of the Participant if (1) such Plan did not contain the limitations imposed under Sections 401(a)(17) and 415 of the Code and (2) the term "Compensation" (as defined in Section 2.5 hereof) were used for purposes of determining the amount of profit sharing contributions under the Profit Sharing Plan, OVER (ii) the amount of the Employer's Profit Sharing Contribution which is actually made to such Plan on behalf of the Participant for such Plan Year (the "Excess Profit Sharing Benefits"). (b) MINIMUM BENEFIT. Notwithstanding the foregoing, the Account balance of a Participant who was a participant in the Prior Plan on the Effective Date shall in no event be less than the amount credited to such Participant's account under the Prior Plan as of August 31, 2000. SECTION 3.2. BASIC AND ADDITIONAL EXCESS 401(k) BENEFITS. (a) AMOUNT OF EXCESS 401(k) BENEFITS. Each 401(k) Employee who is a Participant, may, prior to the first day of any Plan Year, by completing an approved deferral election form, direct the Company to reduce his Compensation for such Plan Year and subsequent Plan Years, by an amount equal to the difference between (i) a specified percentage, in 1% increments, with a maximum of 17%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions actually permitted to be contributed for him to the Profit Sharing Plan for such Plan Year by reason of the application of the limitations under Sections 402(g), 401(a)(17), and 401(k)(3) of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits"). As further described in Section 3.4, if a Participant who has completed a deferral election form for a Plan Year fails to complete a new deferral election form for a 4 6 subsequent Plan Year, such prior deferral election form shall continue in effect for each subsequent Plan Year. (b) CLASSIFICATION OF EXCESS 401(k) BENEFITS. The Excess 401(k) Benefits for a particular Plan Year shall be calculated monthly and shall be further divided into the "Basic Excess 401(k) Benefits" and the "Additional Excess 401(k) Benefits" as follows: (i) The Basic Excess 401(k) Benefits shall be determined by multiplying each Excess 401(k) Benefit by a fraction, the numerator of which is the lesser of the percentage of Compensation elected to be deferred in the 401(k) Deferral Election Form for such Plan Year or 7% and the denominator of which is the percentage of Compensation elected to be deferred; and (ii) The Additional Excess 401(k) Benefits (if any) shall be determined by multiplying each Excess 401(k) Benefit by a fraction, the numerator of which is the difference between (1) the percentage of Compensation elected to be deferred in the 401(k) Deferral Election Form for such Plan Year and (2) 7%, and the denominator of which is the percentage of Compensation elected to be deferred. The Basic Excess 401(k) Benefits shall be credited to the Basic Excess 401(k) Sub-Account under this Plan and the Additional Excess 401(k) Benefits shall be credited to the Additional Excess 401(k) Sub-Account hereunder. SECTION 3.3. EXCESS MATCHING BENEFITS. A 401(k) Employee who is a Participant shall have credited to his Basic or Additional Excess Matching Sub-Account (as applicable) an amount equal to the Matching Employer Contributions attributable to the Basic or Additional Excess 401(k) Benefits that he is prevented from receiving under the Profit Sharing Plan because of the limitations of Code Sections 402(g), 401(a)(17), 401(k)(3) and 401(m) of the Code (the "Excess Matching Benefits"). SECTION 3.4. RULES RELATING TO DEFERRAL ELECTIONs. (a) DEFERRAL PERIOD/TIME OF PAYMENT. (i) GENERAL RULE. The initial deferral elections made by a Participant under Sections 3.2 and 3.3 above shall also contain such Participant's irrevocable election regarding the time of the commencement of payment of the Participant's entire Excess 401(k) Sub-Account hereunder. The Participant may elect to commence payment of such Sub-Account as soon as practicable following one of the following dates: (A) the date on which he ceases to be an Employee of the Controlled Group, (B) January 1 of the year following the date on which he ceases to be an Employee of the Controlled Group, (C) the date on which he attains an age specified in the deferral form, 5 7 (D) January 1 of the year following the date on which he attains an age specified in the deferral form, or (E) the earlier or later of any two such dates. A Participant may elect a different payment date for his Excess 401(k) Sub-Account in the event that his employment is terminated due to a Disability. such election must also be made on the initial deferral election form. The available payment dates are the same as those specified above. Payment of the Participant's Excess Matching Sub-Account shall be made at the same time as the payment of the Participant's Excess 401(k) Sub-Account. A Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his Excess 401(k)and Excess Matching Sub-Accounts as soon as practicable following the date on which the Participant ceases to be an Employee of the Controlled Group. (ii) SPECIAL ONE-TIME ELECTION. Notwithstanding the foregoing, due to administrative errors on the part of the Company, Participants who are actively employed on August 31, 2000 shall be given a one-time irrevocable election to determine the payment date of their Excess 401(k) Sub-Account(and corresponding Excess Matching Sub-Account) by filing a written election with the Plan Administrator within a thirty day election period specified by the Company. such election period will occur after September 1, 2000 but prior to December 31, 2000. Such an election shall supersede any prior election. A Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his Excess 401(k), Excess Matching Sub-Accounts as soon as practicable following the date on which the Participant ceases to be an Employee of the Controlled Group. (b) EFFECT OF DEFERRAL ELECTIONS. Any direction by a Participant to defer Compensation under Section 3.2 shall be effective with respect to Compensation otherwise payable to the Participant for the Plan Year for which the deferral election form is effective and the Participant shall not be eligible to receive such Compensation. Instead such amounts shall be credited to the Participant's Excess 401(k) Sub-Account hereunder. Any such direction shall be irrevocable and shall remain in effect for subsequent Plan Years unless changed or terminated by the Participant for Plan Years commencing after such change or termination on the appropriate form provided by the Plan Administrator, prior to the first day of any subsequent Plan Year. (c) AUTOMATIC TERMINATION OF DEFERRAL ELECTIONS. (i) A Participant's direction to defer Compensation under Section 3.2 shall automatically terminate on the earlier of the date on which (A) the Participant ceases employment with the Controlled Group,(B) the Participant ceases to satisfy the requirements of Section 2.10(b), (3) the Company is deemed Insolvent or (4) the Plan is terminated. 6 8 (ii) The Plan Administrator may, in its sole and absolute discretion, pursuant to nondiscriminatory rules adopted by the Plan Administrator, reduce and/or cease the deferral of Compensation being made by one or more Participants, to the extent deemed necessary or desirable in order to satisfy the requirements of any applicable law (including, without limitation, federal securities laws). (iii) Any Participant whose eligibility to make Before-Tax Contributions to the Profit Sharing Plan has been suspended because he has taken a Hardship withdrawal from such plan shall not be eligible to defer Excess 401(k) Benefits under this Plan for his period of suspension from the Profit Sharing Plan. ARTICLE IV ---------- ACCOUNTS -------- SECTION 4.1. PARTICIPANTS' ACCOUNTS. The Company shall establish and maintain on its books an Account for each Participant which shall contain the following entries: (a) Credits to an Excess Profit Sharing Sub-Account for the Excess Profit Sharing Benefits described in Section 3.1, which shall be credited to the Sub-Account at the time the Profit Sharing Contributions are otherwise credited to Participants' accounts under the Profit Sharing Plan. (b) Credits to a Basic or Additional Excess 401(k) Sub-Account for the Basic and Additional Excess 401(k) Benefits described in Section 3.2, which shall be credited to the Sub-Account when a 401(k) Employee is prevented from making a Before-Tax Contribution under the Profit Sharing Plan. (c) Credits to a Basic or Additional Excess Matching Sub-Account for the Basic and Additional Excess Matching Benefits described in Section 3.3, which amounts shall be credited to the Sub-Account when a 401(k) Employee is prevented from receiving Matching Employer Contributions under the Profit Sharing Plan. (d) Credits to the appropriate Sub-Account of each Participant of the amount of any and all liabilities of the Company under the Prior Plan which were transferred to this Plan as of the Effective Date. (e) Credits to all Sub-Accounts for the earnings described in Article V, which shall continue until the such Sub-Accounts have been distributed to the Participant or his Beneficiary. (f) Debits for any distributions made from the Sub-Accounts and any amounts forfeited under Section 7.1(e). SECTION 4.2. EFFECT ON OTHER BENEFITS. Benefits payable to or with respect to a Participant under the Profit Sharing Plan or any other Company sponsored (qualified or nonqualified) plan, if any, are in addition to those provided under this Plan. 7 9 ARTICLE V --------- EARNINGS -------- SECTION 5.1. EARNINGS ON BASIC SUB-ACCOUNTS AND PROFIT SHARING SUB-ACCOUNTS. (a) Subject to Subsection (b) and Section 5.3, at the end of each calendar month during a Plan Year, the Excess Profit Sharing Sub-Account, Basic Excess 401(k) Sub-Account and Basic Excess Matching Sub-Account of each Participant shall be credited with an amount determined by multiplying such Participant's average Sub-Account balance during such month by the blended rate earned during such month by the Fixed Income Fund. Notwithstanding the foregoing, in the event that the Adjusted ROE determined for such Plan Year that is applicable to the Participant exceeds the rate credited to the Sub-Accounts under the preceding sentence, such Sub-Accounts shall retroactively be credited with the difference between (i) the amount determined under the preceding sentence, and (ii) the amount determined by multiplying the Participant's average Sub-Account balance during each month of such Plan Year by the Adjusted ROE determined for such Plan Year, compounded monthly. (b) The Adjusted ROE calculation described in Subsection (a) shall be made during the month in which the Participant terminates employment and shall be based on the year-to-date Adjusted ROE for the month ending prior to the date the Participant terminated employment, as calculated by the Participant's Employer. For any subsequent month following termination, such Adjusted ROE calculation shall not apply. The Fixed Income Fund calculation described above for the month in which the Participant receives a distribution from his Sub-Account shall be based on the blended rate earned during the preceding month by the Fixed Income Fund. SECTION 5.2. EARNINGS ON ADDITIONAL SUB-ACCOUNTS. Subject to Section 5.3, at the end of each calendar month during the Plan Year and Additional Excess 401(k) Sub-Account, Additional Excess Matching Sub-Account of each Participant shall be credited with an amount determined by multiplying such Participant's average Sub-Account balance during such month by the blended rate earned during such month by the Fixed Income Fund. The earnings calculation for the month in which the Participant receives a distribution from his Sub-Account shall be based on the blended rate earned during the preceding month by the Fixed Income Fund. SECTION 5.3. CHANGES IN/LIMITATIONS ON EARNINGS ASSUMPTION. (a) The NACCO Industries, Inc. Benefits Committee (the "Committee") may change (but not suspend) the earnings rate credited on Accounts under the Plan at any time upon at least 30 days advance notice to Participants. (b) Notwithstanding any provision of the Plan to the contrary, in no event will earnings on Accounts for a Plan Year be credited at a rate which exceeds 14%. ARTICLE VI ---------- VESTING ------- SECTION 6.1. VESTING. A Participant shall always be 100% vested in all amounts credited to his Account hereunder. 8 10 ARTICLE VII ----------- DISTRIBUTION OF BENEFITS TO PARTICIPANTS ---------------------------------------- SECTION 7.1. TIME AND MANNER OF PAYMENT. (a) EXCESS PROFIT SHARING BENEFITS. The Excess Profit Sharing Benefit payable to a Participant shall be paid in the form of a single lump sum payment as soon as practicable following the later of (i) his termination of employment with the Controlled Group or (ii) the date on which all amounts allocable to the Participant's Excess Profit Sharing Sub-Account for the year of such termination have been credited to such Sub-Account. (b) EXCESS 401(k) SUB-ACCOUNT AND EXCESS MATCHING SUB-ACCOUNT. (i) TIMING. The Excess 401(k) Sub-Account and the Excess Matching Sub-Account shall be paid (or commence to be paid) to the Participant as soon as practicable after the date specified in the Participant's original deferral election form (as provided in Section 3.4(a)). (ii) NORMAL FORM OF PAYMENT. Each such Sub-Account shall be distributed to the Participant in the form of ten annual installments. All installment payments under the Plan shall be based on the value of the particular Sub-Account on the Valuation Date immediately preceding the date such installment is to be paid, with each installment being a fraction of such value in which the numerator is one and the denominator is the total number of remaining installments to be paid. The first installment payment shall be paid as soon as practicable after the designated payment date, with each additional installment being paid in the month of January of each succeeding calendar year. (iii) OPTIONAL FORMS OF PAYMENT. Notwithstanding the foregoing, the Participant may elect to receive the amount credited to his Excess 401(k) sub-Account and his Excess Matching Sub-Account in the form of a single lump sum payment or in annual installments for a period of less than 10 years by filing a notice in writing, signed by the Participant and filed with the Plan Administrator while the Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Accounts. (A single form of payment must be elected for both such Sub-Accounts.) Any such election of the form of benefit may be changed at any time and from time to time, without the consent of any other person, by filing a later election in writing that is signed by the Participant and filed with the Plan Administrator while the Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. Any such lump sum payment shall be paid as soon as practicable following the later of (A) the designated payment date or (B) the date on which all amounts allocable to the particular Sub-Account for the year of such termination have been credited to the such Sub-Account. (c) UNFORESEEABLE EMERGENCY DISTRIBUTIONS. Notwithstanding the foregoing, the Company may at any time, upon written request of the Participant, cause to be paid to such 9 11 Participant an amount equal to all or any part of the Participant's Excess 401(k)Sub-Account and/or Excess Matching Sub-Account if the Company determines, in its absolute discretion based on such reasonable evidence that it shall require, that such a payment or payments is necessary for the purpose of alleviating the consequences of an Unforeseeable Emergency occurring with respect to the Participant. Payments of amounts because of an Unforeseeable Emergency shall be permitted only to the extent reasonably necessary to satisfy the emergency need. Unforeseeable Emergency distributions shall be paid to the Participant in the form of a lump sum payment as soon as practicable after such distribution request is approved and processed by the Company. (d) SMALL ACCOUNTS. Notwithstanding the foregoing payment provisions, in the event that a participant's total Account balance does not exceed $10,000 on the date of the Participant's termination of employment with the Controlled Group, such Account shall automatically be paid to him in a single lump sum payment as soon as practicable following the later of (A) the date of his termination of employment with the Controlled Group or (B) the date on which all amounts allocable to the Participant's Account for the year of such termination have been credited to his Account. (e) WITHDRAWALS SUBJECT TO 10% PENALTY. (i) The provisions of this Subsection shall apply notwithstanding any other provision of the Plan to the contrary. (ii) A Participant who is an Employee may, at any time (and from time to time) elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Additional Excess 401(k) Sub-Account; or (B) the Additional Excess Matching Sub-Account. (iii) In addition to the amounts described in (ii) above, Participants who have previously elected to delay commencement of the payment of such Sub-Accounts and who ceased to be Employees of the Controlled Group may also elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Basic Excess 401(k) Sub-Account; and (B) the Basic Excess Matching Sub-Account. (iv) Withdrawals under this Subsection (e) shall be equal to value of the Sub-Account as of the Valuation Date preceding the payment date, less 10%, and shall be paid to the Participant in the form of a lump sum payment as soon as practicable after such withdrawal request is processed by the Company. Such 10% reduction shall be treated as a forfeiture hereunder and shall immediately be subtracted from the applicable Sub-Account, never to be restored. 10 12 (f) PAYMENT RESTRICTION. Notwithstanding any provision of the Plan to the contrary, the payment of all or any portion of the amounts payable hereunder will be deferred to the extent that any amount payable, when added to any other compensation received or to be received by the Participant in the same calendar year, would not be deductible by the Company by reason of Section 162(m) of the Code. The amount to be deferred will equal the amount that otherwise would not be deductible by the Company by reason of Section 162(m) of the Code, but in not event greater than the total amount otherwise hereunder. The deferred amount shall become payable on December 31 of the first succeeding calendar year in which such amount, when added to all other compensation received or to be received by the Participant in such calendar year, would not be non-deductible by the Company by reason of Section 162(m) of the Code. The Nominating Organization and Compensation Committee of the Board of Directors of the Company, in its sole and absolute discretion, shall have the authority to waive this payment restriction (in whole or in part) upon the written request of the Participant. SECTION 7.2. LIABILITY FOR PAYMENT/EXPENSES. Each Employer shall be liable for the payment of the Excess Retirement Benefits which are payable hereunder to its Employees. Expenses of administering the Plan shall be paid by the Employers, as directed by the Company. ARTICLE VIII ------------ BENEFICIARIES ------------- SECTION 8.1. BENEFICIARY DESIGNATIONS. A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable to the Plan Administrator) signed by the Participant and filed with the Plan Administrator prior to the Participant's death. Separate Beneficiary designations may be made for each Benefit under the Plan. In the absence of such a designation and at any other time when there is no existing Beneficiary designated hereunder, the Beneficiary of a Participant for his Excess 401(k) Benefits, his Excess Matching Benefits and his Excess Profit Sharing Benefits shall be his beneficiary under the Profit Sharing Plan. A person designated by a Participant as his Beneficiary who or which ceases to exist shall not be entitled to any part of any payment thereafter to be made to the Participant's Beneficiary unless the Participant's designation specifically provided to the contrary. If two or more persons designated as a Participant's Beneficiary are in existence with respect to a single Sub-Account, the amount of any payment to the Beneficiary under this Plan shall be divided equally among such persons unless the Participant's designation specifically provides for a different allocation. SECTION 8.2. CHANGE IN BENEFICIARY. (a) Anything herein or in the Profit Sharing Plan to the contrary notwithstanding, a Participant may, at any time and from time to time, change a Beneficiary designation hereunder without the consent of any existing Beneficiary or any other person. A change in Beneficiary hereunder may be made regardless of whether such a change is also made under the Profit Sharing Plan. In other words, the Beneficiary hereunder need not be the same as under the Profit Sharing Plan. (b) Any change in Beneficiary shall be made by giving written notice thereof to the Company or Plan Administrator and any change shall be effective only if received prior to the death of the Participant. 11 13 SECTION 8.3. DISTRIBUTIONS TO BENEFICIARIES. (a) AMOUNT OF BENEFITS. Excess Retirement Benefits payable to a Participant's Beneficiary under this Plan shall be equal to the balance in the applicable Sub-Account of such Participant on the Valuation Date preceding the date of the distribution of the Sub-Account to the Beneficiary. (b) TIME OF PAYMENT. Excess Retirement Benefits payable to a Beneficiary under this Plan shall be paid as soon as practicable following the death of the Participant. (c) FORM OF PAYMENT. All Benefits payable to a Beneficiary hereunder shall be paid in the form of a lump sum payment. ARTICLE IX ---------- MISCELLANEOUS ' ------------- SECTION 9.1. LIABILITY OF COMPANY. Nothing in this Plan shall constitute the creation of a trust or other fiduciary relationship between the Company and any Participant, Beneficiary or any other person. SECTION 9.2. LIMITATION ON RIGHTS OF PARTICIPANTS AND BENEFICIARIES - NO LIEN. (a) This Plan is designed to be an unfunded, nonqualified plan. Nothing contained herein shall be deemed to create a trust or lien in favor of any Participant or Beneficiary on any assets of the Company. The Company shall have no obligation to purchase any assets that do not remain subject to the claims of the creditors of the Company for use in connection with the Plan. No Participant or Beneficiary or any other person shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Company prior to the time that such assets are paid to the Participant or Beneficiary as provided herein. Each Participant and Beneficiary shall have the status of a general unsecured creditor of the Company. (b) Notwithstanding any provision of the Plan to the contrary, the Company shall not be required to make any payment hereunder to any Participant or Beneficiary if the Company is Insolvent at the time such payment is due to be made. SECTION 9.3. NO GUARANTEE OF EMPLOYMENT. Nothing in this Plan shall be construed as guaranteeing future employment to Participants. A Participant continues to be an Employee of the Company solely at the will of the Company subject to discharge at any time, with or without cause. SECTION 9.4. PAYMENT TO GUARDIAN. If a Benefit payable hereunder is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Plan Administrator may direct payment of such Benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Plan Administrator may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Employers from all liability with respect to such Benefit. 12 14 SECTION 9.5. ASSIGNMENT. (a) Subject to Subsection (b), no right or interest under this Plan of any Participant or Beneficiary shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of the Participant or Beneficiary. (b) Notwithstanding the foregoing, the Plan Administrator shall honor a judgment, order or decree from a state domestic relations court which requires the payment of all or a part of a Participant's or Beneficiary's vested interest under this Plan to an "alternate payee" as defined in Code Section 414(p). SECTION 9.6. SEVERABILITY. If any provision of this Plan or the application thereof to any circumstance(s) or person(s) is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the application of such provision to other circumstances or persons shall not be affected thereby. ARTICLE X --------- ADMINISTRATION OF PLAN ---------------------- SECTION 10.1. ADMINISTRATION. (a) IN GENERAL. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall have discretion to interpret where necessary all 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 make factual findings with respect to any issue arising under the Plan, to determine the rights and status under the Plan of Participants or other persons, to resolve questions (including factual questions) or disputes arising under the Plan and to make any determinations with respect to the benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the foregoing, the Plan Administrator is hereby granted the authority (i) to determine whether a particular employee is a Participant, and (ii) to determine if a person is entitled to Benefits hereunder and, if so, the amount and duration of such Benefits. The Plan Administrator's determination of the rights of any person hereunder shall be final and binding on all persons, subject only to the provisions of Sections 10.3 and 10.4 hereof. (b) DELEGATION OF DUTIES. The Plan Administrator may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Benefits, to a named administrator or administrators. SECTION 10.2. REGULATIONS. The Plan Administrator shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of the Plan or to interpret the provisions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan. The rules, regulations and interpretations made by the Plan Administrator shall, subject only to the provisions of Sections 10.3 and 10.4 hereof, be final and binding on all persons. SECTION 10.3. CLAIMS PROCEDURES. The Plan Administrator shall determine the rights of a person to any Benefits hereunder. Any person who believes that he has 13 15 not received the Benefits to which he is entitled under the Plan may file a claim in writing with the Plan Administrator. The Plan Administrator shall, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant within the first 90 day period), either allow or deny the claim in writing. If a claimant does not receive written notice of the Plan Administrator's decision on his claim within the above-mentioned period, the claim shall be deemed to have been denied in full. A denial of a claim by the Plan Administrator, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include: (a) the specific reasons for the denial; (b) specific reference to pertinent Plan provisions on which the denial is based; (c) 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 (d) an explanation of the claim review procedure. A claimant whose claim is denied (or his duly authorized representative) may within 60 days after receipt of denial of a claim file with the Plan Administrator a written request for a review of such claim. If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Plan Administrator on his claim. If such an appeal is so filed within such 60 day period, the Company (or its delegate) shall conduct a full and fair review of such claim. During such review, the claimant shall be given the opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing. For this purpose, the Company (or its delegate) shall have the same power to interpret the Plan and make findings of fact thereunder as is given to the Plan Administrator under Section 10.1(a) above. The Company shall mail or deliver to the claimant a written decision on the matter based on the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request for review (unless special circumstances require an extension of up to 60 additional days, in which case written notice of such extension shall be given to the claimant prior to the commencement of such extension). Such decision shall be written in a manner calculated to be understood by the claimant, shall state the specific reasons for the decision and the specific Plan provisions on which the decision was based and shall, to the extent permitted by law, be final and binding on all interested persons. If the decision on review is not furnished to the claimant within the above-mentioned time period, the claim shall be deemed to have been denied on review. SECTION 10.4. REVOCABILITY OF PLAN ADMINISTRATOR/COMPANY ACTION. Any action taken by the Plan Administrator or the Company with respect to the rights or benefits under the Plan of any person shall be revocable by the Plan Administrator or the Company as to payments not yet made to such person, and acceptance of any Benefits under the Plan constitutes 14 16 acceptance of and agreement to the Plan Administrator's or the Company's making any appropriate adjustments in future payments to such person (or to recover from such person) any excess payment or underpayment previously made to him. SECTION 10.5. AMENDMENT. The Committee may at any time amend any or all of the provisions of this Plan, except that (a) no such amendment may adversely affect any Participant's vested Benefit as of the date of such amendment, and (b) no such amendment may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any amendment shall be in the form of a written instrument executed by an officer of the Company on the order of the Committee. Subject to the foregoing provisions of this Section, such amendment shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. SECTION 10.6. TERMINATION. (a) The Company, in its sole discretion, may terminate this Plan at any time and for any reason whatsoever, except that, subject to Subsection (b) hereof, (i) no such termination may adversely affect any Participant's vested Benefit as of the date of such termination and (ii) no such termination may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any such termination shall be expressed in the form of a written instrument executed by an officer of the Company on the order of the Company. Subject to the foregoing provisions of this Section, such termination shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. Written notice of any termination shall be given to the Participants as soon as practicable after the instrument is executed. (b) Notwithstanding anything in the Plan to the contrary, in the event of a termination of the Plan (or any portion thereof), the Company, in its sole and absolute discretion, shall have the right to change the time and form of distribution of Participants' Excess Retirement Benefits including requiring that all amounts credited to Participant's Account hereunder be immediately distributed in the form of lump sum payments. EXECUTED, this 29th day of August, 2000. ---- ------ NACCO INDUSTRIES, INC. By: /s/ Charles A. Bittenbender ------------------------------------- Title: Vice President, General Counsel and Secretary 15 EX-10.XXXVII 5 l87125bex10-xxxvii.txt EXHIBIT 10(XXXVII) 1 EXHIBIT 10(xxxvii) ================================================================================ PURCHASE AND SALE AGREEMENT BY AND AMONG PHILLIPS PETROLEUM COMPANY, PHILLIPS COAL COMPANY, THE NORTH AMERICAN COAL CORPORATION, OXBOW PROPERTY COMPANY L.L.C. AND RED HILLS PROPERTY COMPANY L.L.C. Dated October 11, 2000 ================================================================================ 2 TABLE OF CONTENTS
Page I. Purchase and Sale of Subject Assets; Effective Date and Time.............................................1 - -- ------------------------------------------------------------ (a) Purchase and Sale of Subject Assets.............................................................1 --- ----------------------------------- (b) Effective Date and Time.........................................................................1 --- ----------------------- II. Sale Price and Manner of Payment.........................................................................1 - --- -------------------------------- III. Closing and Deliveries...................................................................................2 - ---- ---------------------- (a) Time and Place of Closing.......................................................................2 --- ------------------------- (b) Deliveries by PPC and Seller....................................................................2 --- ---------------------------- (c) Deliveries by Purchasers........................................................................4 --- ------------------------ (d) Deliveries to Wholly-Owned Subsidiaries of NACoal...............................................5 --- ------------------------------------------------- IV. Seller's Representations.................................................................................5 - --- ------------------------ (a) Representations Regarding PPC, Seller and this Agreement........................................5 --- --------------------------------------------------------- (i) Organization, Good Standing and Foreign Qualification..................................5 --- ----------------------------------------------------- (ii) Corporate Power and Authority..........................................................5 ---- ----------------------------- (iii) Authorization, Validity and Non-Contravention..........................................5 ----- --------------------------------------------- (iv) Title to Subject Assets................................................................6 ---- ----------------------- (v) Consents...............................................................................6 --- -------- (vi) Litigation.............................................................................7 ---- ---------- (vii) No Brokers or Finders..................................................................7 ----- --------------------- (b) Representations Regarding the Joint Venture Interests...........................................7 --- ----------------------------------------------------- (i) No Default or Breach...................................................................7 --- -------------------- (ii) Disclosure.............................................................................7 ---- ---------- (iii) Joint Venture Assets...................................................................7 ----- -------------------- (iv) Definition of Knowledge................................................................7 ---- ----------------------- (c) Representations Regarding Land Management Company...............................................8 --- ------------------------------------------------- (i) Organization, Good Standing and Foreign Qualification..................................8 --- ----------------------------------------------------- (ii) Capitalization.........................................................................8 ---- -------------- (iii) Options or Other Rights................................................................8 ----- ----------------------- (iv) Title to Real Property.................................................................8 ---- ---------------------- (v) Quiet Enjoyment........................................................................9 --- --------------- (vi) Defaults...............................................................................9 ---- -------- (vii) Encumbrances...........................................................................9 ----- ------------ (viii) Environmental Matters.................................................................10 ------ --------------------- (ix) Consents..............................................................................11 ---- -------- (x) Litigation............................................................................11 --- ---------- (xi) Land Management Company Non-Operating Interests.......................................11 ---- ----------------------------------------------- (xii) No Default or Breach in Land Management Company Non-Operating Interests...............11 ----- -----------------------------------------------------------------------
i 3 (xiii) Liabilities and Obligations...........................................................12 ------ --------------------------- (d) Representations Regarding the Coal Leases, Fee Properties, Non-Operating Interests and the --- ------------------------------------------------------------------------------------------ Eight Mile Venture.............................................................................12 ------------------ (i) Title.................................................................................12 --- ----- (ii) Quiet Enjoyment.......................................................................12 ---- --------------- (iii) Defaults..............................................................................12 ----- -------- (iv) Encumbrances..........................................................................12 ---- ------------ (v) Environmental Matters.................................................................13 --- --------------------- (vi) Non-Operating Interests...............................................................14 ---- ----------------------- (vii) No Default or Breach in Non-Operating Interests.......................................14 ----- ----------------------------------------------- (viii) Norit Agreements......................................................................14 ------ ---------------- (ix) No Default or Breach in Norit Agreements..............................................14 ---- ---------------------------------------- (x) Disclosure............................................................................15 --- ---------- (xi) Liabilities and Obligations...........................................................15 ---- --------------------------- (e) Representations Regarding Power Project Interest...............................................15 --- ------------------------------------------------ (i) Power Project Interest Contracts......................................................15 --- -------------------------------- (ii) No Default or Breach..................................................................15 ---- -------------------- (iii) Disclosure............................................................................15 ----- ---------- (iv) Liabilities and Obligations...........................................................15 ---- --------------------------- (f) Representations Regarding the Miscellaneous Assets, the Office Lease and the Sublease..........16 --- ------------------------------------------------------------------------------------- (i) Records...............................................................................16 --- ------- (ii) Office Lease..........................................................................16 ---- ------------ (iii) No Default or Breach Under Office Lease...............................................16 ----- --------------------------------------- (iv) Owned Fixtures and Personal Property..................................................16 ---- ------------------------------------ (v) Leased Fixtures and Personal Property.................................................17 --- ------------------------------------- (vi) Sublease..............................................................................17 ---- -------- (g) Tax Representations............................................................................17 --- ------------------- (i) Tax Returns...........................................................................17 --- ----------- (ii) Audits, Claims, Waivers...............................................................18 ---- ----------------------- (iii) Payments..............................................................................18 ----- -------- (iv) Withholding...........................................................................18 ---- ----------- (v) Affiliated Groups.....................................................................18 --- ----------------- (vi) Tax Sharing Agreements................................................................18 ---- ---------------------- (vii) Powers of Attorney....................................................................18 ----- ------------------ (viii) Tax Definitions.......................................................................18 ------ --------------- V. Purchasers' Representations.............................................................................19 - -- --------------------------- (a) Organization, Good Standing and Authority......................................................19 --- ----------------------------------------- (b) Authorization, Validity and Non-Contravention..................................................19 --- --------------------------------------------- (c) No Brokers or Finders..........................................................................20 --- --------------------- (d) Consents.......................................................................................20 --- -------- (e) Sublease.......................................................................................20 --- -------- VI. The Subject Assets......................................................................................21 - --- ------------------ (a) Subject Assets.................................................................................21 --- -------------- 1. Red River Mining Company..............................................................21 -- ------------------------
ii 4 2. Mississippi Lignite Mining Company....................................................21 -- ---------------------------------- 3. Shares of Land Management Company.....................................................22 -- --------------------------------- 4. Coal Leases, Fee Properties, Non-Operating Interests and the Eight Mile Venture.......22 -- ------------------------------------------------------------------------------- 5. Power Project Interest................................................................22 -- ---------------------- 6. Miscellaneous Assets..................................................................22 -- -------------------- VII. Consents to Assignments and Subleases...................................................................23 - ---- ------------------------------------- (a) No Assignment..................................................................................23 --- ------------- (b) Further Assurances.............................................................................23 --- ------------------ VIII. Guaranties of Performance...............................................................................24 - ----- ------------------------- (a) Representation and Warranty of PPC.............................................................24 --- ---------------------------------- (b) Release........................................................................................24 --- ------- (c) Equipment Lease Guaranties and Letter of Credit Securing Reclamation Bond......................24 --- ------------------------------------------------------------------------- IX. Conditions of Closing...................................................................................25 - --- --------------------- (a) Purchasers' Conditions.........................................................................25 --- ---------------------- (i) Deliveries............................................................................25 --- ---------- (ii) Representations and Warranties and Covenants..........................................25 ---- -------------------------------------------- (iii) Third-Party Consents..................................................................25 ----- -------------------- (iv) No Orders.............................................................................25 ---- --------- (v) No Litigation.........................................................................25 --- ------------- (vi) Equipment Lease Guaranties and Letter of Credit.......................................25 ---- ----------------------------------------------- (b) Conditions of PPC and Seller...................................................................26 --- ---------------------------- (i) Representations and Warranties and Covenants..........................................26 --- -------------------------------------------- (ii) No Orders.............................................................................26 ---- --------- (iii) Deliveries............................................................................26 ----- ---------- (iv) No Litigation.........................................................................26 ---- ------------- (v) Equipment Lease Guaranties and Letter of Credit.......................................26 --- ----------------------------------------------- X. Certain Pre-Closing Obligations.........................................................................26 - -- ------------------------------- (a) Actions Regarding Pre-Closing Covenants........................................................26 --- --------------------------------------- (b) Changes to the Subject Assets..................................................................26 --- ----------------------------- (c) Full Access....................................................................................27 --- ----------- (d) No Shop........................................................................................28 --- ------- (e) Notice of Breach or Non-Compliance.............................................................28 --- ---------------------------------- (f) Payment of Inter-Company Accounts Payable......................................................28 --- ----------------------------------------- XI. Indemnification.........................................................................................28 - --- --------------- (a) By PPC and Seller..............................................................................28 --- ----------------- (b) By Purchasers..................................................................................29 --- ------------- (c) Notice of Claim................................................................................29 --- --------------- (d) Defense of Actions.............................................................................29 --- ------------------ XII. Certain Post-Closing Covenants..........................................................................29 - ---- ------------------------------ (a) Use of Phillips Name...........................................................................29 --- --------------------
iii 5 (b) Confidentiality of Records.....................................................................29 --- -------------------------- (c) Assumed Liabilities............................................................................30 --- ------------------- (i) Joint Venture Contracts...............................................................30 --- ----------------------- (ii) Coal Leases...........................................................................30 ---- ----------- (iii) Fee Properties and Miscellaneous Assets...............................................30 ----- --------------------------------------- (iv) Non-Operating Interests...............................................................30 ---- ----------------------- (v) Norit Agreements......................................................................30 --- ---------------- (vi) Power Project Interest Contracts......................................................31 ---- -------------------------------- (vii) Contracts Included in Miscellaneous Assets............................................31 ----- ------------------------------------------ (d) Real Property Administration...................................................................31 --- ---------------------------- (e) Red River Services Agreement...................................................................31 --- ---------------------------- (f) Post-Closing Expense Reimbursement.............................................................31 --- ---------------------------------- (g) License to Office Space........................................................................32 --- ----------------------- XIII. Tax Matters.............................................................................................32 - ----- ----------- (a) Section 338(h)(10) Election....................................................................32 --- --------------------------- (b) Section 338(h)(10) Allocation..................................................................32 --- ----------------------------- (c) Tax Price Allocation...........................................................................32 --- -------------------- (d) Post-Closing Tax Matters.......................................................................33 --- ------------------------ XIV. Public Announcements....................................................................................33 - ---- -------------------- XV. Subsequent Power Project Interest.......................................................................33 - --- --------------------------------- (a) Disposition of Power Project Interest..........................................................33 --- ------------------------------------- (b) Payment Due Seller Upon Commercial Operation of Second Electric Power Generation Facility......34 --- ----------------------------------------------------------------------------------------- XVI. Termination.............................................................................................34 - ---- ------------ (a) By Purchasers..................................................................................34 --- ------------- (b) By PPC and Seller..............................................................................34 --- ----------------- (c) By Mutual Agreement; No Waiver.................................................................34 --- ------------------------------ (d) Due Diligence Termination......................................................................35 --- ------------------------- XVII. Miscellaneous...........................................................................................35 - ----- ------------- (a) Successors and Assigns.........................................................................35 --- ---------------------- (b) No Third Party Beneficiaries...................................................................35 --- ---------------------------- (c) Assignment.....................................................................................35 --- ---------- (d) Notices........................................................................................35 --- ------- (e) Counterparts...................................................................................36 --- ------------ (f) Severability...................................................................................36 --- ------------ (g) Survival.......................................................................................36 --- -------- (h) Entire Agreement...............................................................................36 --- ---------------- (i) Expenses.......................................................................................36 --- -------- (j) Applicable Law.................................................................................36 --- -------------- (k) Headings.......................................................................................37 --- -------- (l) Waiver and Amendment...........................................................................37 --- --------------------
iv 6 DEFINED TERMS
PAGE Action...........................................................................................................25 Agreement.........................................................................................................1 Assumed Liabilities..............................................................................................26 CERCLA...........................................................................................................10 Claim............................................................................................................25 Closing...........................................................................................................2 Closing Date......................................................................................................2 Coal Leases......................................................................................................19 Code..............................................................................................................4 Consents..........................................................................................................3 Contracts.........................................................................................................5 Current Period Tax...............................................................................................17 Effective Date....................................................................................................1 Eight Mile Joint Venture Agreement...............................................................................19 Eight Mile Venture...............................................................................................19 Eight Mile Venture Interest......................................................................................19 Equipment Lease Guaranties.......................................................................................21 Excluded Liabilities.............................................................................................20 Fee Properties...................................................................................................19 Fixtures and Personal Property...................................................................................15 Guaranties.......................................................................................................21 Hazardous Materials...............................................................................................9 Hazardous Substance...............................................................................................9 Indemnified Party................................................................................................25 Indemnifying Party...............................................................................................25 Joint Ventures....................................................................................................3 Knowledge.........................................................................................................7 Land Management Assets............................................................................................8 Land Management Company..........................................................................................19 Landlord.........................................................................................................14 Laws..............................................................................................................5 Leasehold Assets..................................................................................................8 Letter of Credit.................................................................................................21 Liens.............................................................................................................6 Litigation........................................................................................................6 Miscellaneous Assets.............................................................................................20 Mississippi Lignite Interest.....................................................................................19 Mississippi Lignite Joint Venture Agreement......................................................................19 Mississippi Lignite Mining Company...............................................................................19 NACoal............................................................................................................1 Non-Operating Interests..........................................................................................19 Norit Agreements..................................................................................................2 Office Lease.....................................................................................................14
v 7 Options...........................................................................................................6 Orders............................................................................................................5 Oxbow.............................................................................................................1 Pollutant or Contaminant..........................................................................................9 Power Project Interest...........................................................................................19 PPC...............................................................................................................1 Purchaser.........................................................................................................1 Purchasers........................................................................................................1 Records..........................................................................................................14 Red Hills.........................................................................................................1 Red River Interest...............................................................................................18 Red River Joint Venture Agreement................................................................................18 Red River Mining Company.........................................................................................18 Sale Price........................................................................................................2 Seller............................................................................................................1 Shares............................................................................................................7 Subject Assets...................................................................................................18 Sublease..........................................................................................................4 Tax..............................................................................................................16 Tax Price........................................................................................................28 Tax Return.......................................................................................................17 Taxing Authority.................................................................................................17
vi 8 SCHEDULES Schedule IV(a)(v) Consents for PPC and Seller Schedule IV(b)(i) No Default or Breach Under Joint Venture Contracts Schedule IV(c)(iv) Title to Land Management Assets Schedule IV(c)(vii) Encumbrances on Land Management Assets Schedule IV(d)(i) Title to Coal Leases and Fee Properties Schedule IV(d)(iv) Encumbrances on Coal Leases and Fee Properties Schedule IV(e)(i) Power Project Interest Contracts Schedule IV(g) Exceptions to Tax Representations Schedule VI(a)(4)(i) Coal Leases Schedule VI(a)(4)(ii) Fee Properties Schedule VI(a)(4)(iii) Non-Operating Interests Schedule VI(a)(4)(iv) Norit Agreements Schedule VI(a)(6) Miscellaneous Assets Schedule VIII(a) PPC Guaranties of Performance Schedule XIII(b) Section 338(h)(10) Allocation Schedule XIII(c) Tax Price Allocation
EXHIBITS Exhibit III(b)(i)-1 Instrument of Assignment for Red River Interest Exhibit III(b)(i)-2 Instrument of Assignment for Mississippi Lignite Interest Exhibit III(b)(ii)-1 Instrument of Assignment for Coal Leases Exhibit III(b)(ii)-2 Instrument of Assignment for Eight Mile Venture Interest and the Norit Agreements Exhibit III(b)(iii)-1 Special Warranty Deed for Fee Properties Exhibit III(b)(iii)-2 Special Warranty Deed for Mineral Properties Exhibit III(b)(iv) Instrument of Assignment for Non-Operating Interests Exhibit III(b)(vi) Instrument of Assignment for Power Project Interest Exhibit III(b)(vii)-1 Bill of Sale for Records and Fixtures and Personal Property Exhibit III(b)(vii)-2 Instrument of Assignment for Leases of Fixtures and Personal Property Exhibit III(b)(xvi) Section 1445(b)(2) Certificate Exhibit III(b)(xvii) Sublease of Office Lease
vii 9 PURCHASE AND SALE AGREEMENT This Purchase and Sale Agreement ("Agreement") is dated this 11th day of October, 2000, by and among Phillips Petroleum Company, a Delaware corporation ("PPC"), Phillips Coal Company, a Nevada corporation ("Seller"), The North American Coal Corporation, a Delaware corporation ("NACoal"), Oxbow Property Company L.L.C., a Louisiana limited liability company ("Oxbow"), and Red Hills Property Company L.L.C., a Mississippi limited liability company ("Red Hills"; NACoal, Oxbow and Red Hills, collectively, "Purchasers" and, individually, a "Purchaser"). WHEREAS, Seller is the owner of certain assets more fully described in Article VI hereof (the "Subject Assets"); and WHEREAS, Seller desires to sell, and Purchasers desire to acquire, all of Seller's respective right, title and interest in and to the Subject Assets upon the terms and conditions set forth in this Agreement. NOW THEREFORE, in consideration of the mutual covenants, agreements, representations, warranties and conditions hereinafter set forth, the parties hereby agree as follows: I. PURCHASE AND SALE OF SUBJECT ASSETS; EFFECTIVE DATE AND TIME (a) PURCHASE AND SALE OF SUBJECT ASSETS. Subject to the terms and conditions set forth herein, at the Closing (as hereinafter defined) (i) Seller shall sell, assign and transfer the Red River Interest (as hereinafter defined) to Oxbow, (ii) Seller shall sell, assign and transfer the Mississippi Lignite Interest (as hereinafter defined) to Red Hills, (iii) Seller shall sell, assign and transfer all of the other Subject Assets to NACoal, (iv) NACoal shall cause Oxbow to, and Oxbow shall, purchase and acquire the Red River Interest from Seller, (v) NACoal shall cause Red Hills to, and Red Hills shall, purchase and acquire the Mississippi Lignite Interest from Seller, and (vi) NACoal shall purchase and acquire all of the other Subject Assets from Seller. (b) EFFECTIVE DATE AND TIME. The effective date of the sale and purchase provided for in this Agreement shall be the date of this Agreement (the "Effective Date"), and the effective time of such purchase and sale shall be the close of business on the Effective Date. II. SALE PRICE AND MANNER OF PAYMENT In consideration for the Subject Assets, at the Closing (i) NACoal shall cause Oxbow to, and Oxbow shall, pay the sum of Twelve Million Five Hundred Thousand Dollars ($12,500,000), (ii) NACoal shall cause Red Hills to, and Red Hills shall, pay the sum of One Hundred Nine Million Dollars ($109,000,000), and (iii) NACoal shall pay or cause to be paid the sum of Six Million Eight Hundred Thousand Dollars ($6,800,000), by bank wire transfer of immediately available funds to Seller's bank accounts, which accounts shall be designated in writing by PPC or Seller at least three (3) business days prior to Closing. The total of such 1 10 amounts is One Hundred Twenty-Eight Million Three Hundred Thousand Dollars ($128,300,000) (the "Sale Price"). The Sale Price and the payments required in the foregoing sentence shall be adjusted in accordance with Article VIII(c) by deducting from the amount stated in clause (ii) of the foregoing sentence the amount which is stated in the last sentence of Article VIII(c). III. CLOSING AND DELIVERIES (a) TIME AND PLACE OF CLOSING. The consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at 9:00 a.m. local time on October 11, 2000, subject to the satisfaction or waiver of the conditions contained in Article IX, in the offices of NACoal located at 14785 Preston Road, Suite 1100, Dallas, Texas 75240-7891, or at such other time or place as the parties mutually agree. The date on which the Closing occurs shall be referred to herein as the "Closing Date". (b) DELIVERIES BY PPC AND SELLER. At the Closing, PPC and Seller shall deliver or cause to be delivered to Purchasers the following: (i) a duly executed instrument of assignment in the approximate form attached hereto as EXHIBIT III(b)(i)-1 assigning and transferring to Oxbow the Red River Interest and a duly executed instrument of assignment in the approximate form of EXHIBIT III(b)(i)-2 assigning and transferring to Red Hills the Mississippi Lignite Interest; (ii) duly executed instruments of assignment in the approximate form attached hereto as EXHIBIT III(b)(ii)-1 assigning and transferring to NACoal all of Seller's right, title and interest in and to the Coal Leases (as hereinafter defined) and a duly executed instrument of assignment in the approximate form attached hereto as EXHIBIT III(b)(ii)-2 assigning and transferring to NACoal the Eight Mile Venture Interest (as hereinafter defined), and all of Seller's right, title and interest in and to the Contracts (as hereinafter defined) listed on SCHEDULE VI(a)(4)(iv) (the "Norit Agreements"); (iii) duly executed deeds in the approximate form attached hereto as EXHIBITS III(b)(iii)-1 and III(b)(iii)-2 conveying, assigning and transferring to NACoal all of Seller's right, title and interest in and to the Fee Properties (as hereinafter defined); (iv) a duly executed instrument of assignment in the approximate form attached hereto as EXHIBIT III(b)(iv) assigning and transferring to NACoal all of Seller's right, title and interest in and to the Non-Operating Interests (as hereinafter defined); (v) certificates representing all of the Shares (as hereinafter defined) duly endorsed to NACoal or duly executed stock powers in proper form for transfer to NACoal, and true, correct and complete minute books, share ledgers and transfer books of Land Management Company (as hereinafter defined); (vi) a duly executed instrument of assignment in the approximate form attached hereto as EXHIBIT III(b)(vi) assigning and transferring to NACoal all of Seller's right, title and interest in and to the Power Project Interest (as hereinafter defined); 2 11 (vii) a duly executed instrument of assignment and a bill of sale in the approximate forms attached hereto as EXHIBITS III(b)(vii)-2 and III(b)(vii)-1, respectively, assigning and transferring to NACoal all of Seller's right, title and interest in and to the Miscellaneous Assets (as hereinafter defined); (viii) receipt for the payment of the Sale Price delivered by Purchasers pursuant to Article II hereof; (ix) a recent good standing certificate for each of Land Management Company, PPC and Seller from the Secretary of State of its state of incorporation dated not more than twenty (20) days prior to the Closing; (x) unless otherwise previously agreed to by Purchasers in writing, copies of all consents, approvals, authorizations, waivers or notifications of any governmental authority or any other person ("Consents") listed on SCHEDULE IV(a)(v); (xi) the certificate of incorporation of each of Land Management Company, PPC and Seller, certified as of a recent date not more than twenty (20) days prior to the Closing by the appropriate Secretary of State; (xii) a certificate of the Secretary or Assistant Secretary of each of PPC and Seller certifying that attached thereto are true and correct copies of (A) the bylaws of such party; and (B) resolutions duly and validly adopted by the Board of Directors of such party authorizing and approving this Agreement and all other transactions and agreements contemplated hereby to be undertaken by such party; (xiii) a certificate of an officer of each of PPC and Seller certifying on behalf of such party that (A) each of its representations and warranties contained in this Agreement is true and correct in all respects as of the Closing Date with the same force and effect as though made as of the Closing Date (except to the extent they expressly relate to a prior date); (B) each of the conditions to be performed or complied with by such party as of or prior to the Closing Date, unless waived in writing by Purchasers, has been duly performed or complied with by such party in accordance with the terms of this Agreement; and (C) all agreements, undertakings and obligations to be performed or complied with by such party as of or prior to the Closing Date, unless waived in writing by Purchasers, have been duly performed or complied with by such party in accordance with the terms of this Agreement; (xiv) a resignation of each of the officers and the members of the Board of Directors of Land Management Company; (xv) a resignation of each of the members of the Management Committee appointed by Seller for each of Red River Mining Company (as hereinafter defined), Mississippi Lignite Mining Company (as hereinafter defined; Red River Mining Company and Mississippi Lignite Mining Company collectively, the "Joint Ventures") and the Eight Mile Venture (as hereinafter defined); 3 12 (xvi) a certificate of Seller, dated as of the Closing Date, signed by an authorized officer of Seller under Section 1445(b)(2) of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), and the rules and regulations thereunder, in the approximate form attached hereto as EXHIBIT III(b)(xvi) setting forth Seller's (A) U.S. federal taxpayer identification number, and (B) statement that Seller is not a foreign person within the meaning of Section 1445(f)(3) of the Code; and (xvii) a duly executed Sublease Agreement (the "Sublease") in the form attached hereto as EXHIBIT III(b)(xvii). (c) DELIVERIES BY PURCHASERS. At the Closing, Purchasers shall deliver or cause to be delivered to PPC and Seller the following: (i) the Sale Price in the amount and manner specified in Article II; (ii) a receipt for the Shares; (iii) a recent good standing certificate for each of the Purchasers, from the Secretary of State of the state of its incorporation or formation, dated not more than twenty (2y0) days prior to the Closing; (iv) the certificate of incorporation or similar charter document of each of Purchasers certified as of a recent date not more than twenty (20) days prior to the Closing by the Secretary of State of the state of its incorporation or formation; (v) a certificate of the Secretary or Assistant Secretary of each of Purchasers certifying that attached thereto are true and correct copies of (A) the bylaws or similar charter document of such Purchaser and (B) resolutions duly and validly adopted by the Board of Directors or similar governing body of such Purchaser authorizing and approving this Agreement and all other transactions and agreements contemplated hereby; and (vi) a certificate of an officer of each of Purchasers certifying on behalf of such Purchaser that (A) each of the representations and warranties of such Purchaser contained in Article V of this Agreement is true and correct in all respects as of the Closing Date with the same force and effect as though made by such Purchaser as of the Closing Date (except to the extent they expressly relate to a prior date); (B) each of the conditions to be performed or complied with by such Purchaser as of or prior to the Closing Date, unless waived in writing by PPC and Seller, has been duly performed or complied with by such Purchaser in accordance with the terms of this Agreement; and (C) all agreements, undertakings and obligations to be performed or complied with by such Purchaser as of or prior to the Closing, unless waived in writing by PPC and Seller, have been duly performed or complied with by such Purchaser in accordance with the terms of this Agreement. (d) DELIVERIES TO WHOLLY-OWNED SUBSIDIARIES OF NACOAL. Notwithstanding Article III(b) above, NACoal shall have the right to require that any of the Subject Assets to be conveyed to it be conveyed and delivered to one or more of its directly or indirectly wholly- 4 13 owned corporate subsidiaries, or to any Joint Venture that is to be directly or indirectly wholly owned by it following the Closing, and that any conveyancing document called for by Article III(b) convey all of Seller's right, title and interest in such Subject Assets to the entity so designated and not to NACoal. With respect to any Subject Asset so conveyed and delivered by Seller as required by NACoal to any such entity, NACoal, on behalf of such entity, at the Closing as provided in Article II shall pay Seller the portion of the Sale Price allocated to such Subject Asset as set forth on SCHEDULE XIII(c). IV. SELLER'S REPRESENTATIONS PPC and Seller jointly and severally represent and warrant to and with Purchasers that: (a) REPRESENTATIONS REGARDING PPC, SELLER AND THIS AGREEMENT. (i) ORGANIZATION, GOOD STANDING AND FOREIGN QUALIFICATION. Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada; PPC is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware; and Seller is duly qualified to carry on its business in the states in which the Subject Assets owned by it are located. (ii) CORPORATE POWER AND AUTHORITY. Seller has all requisite power and authority to carry on its business as presently conducted, to execute and deliver this Agreement, to sell the Subject Assets on the terms described in this Agreement, and to perform its obligations hereunder. PPC has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. (iii) AUTHORIZATION, VALIDITY AND NON-CONTRAVENTION. This Agreement has been duly and validly executed and delivered by each of PPC and Seller and, assuming the due execution thereof by Purchasers, constitutes the legal, valid and binding obligation of each of PPC and Seller, enforceable against each of PPC and Seller in accordance with its terms, except as such enforceability may be limited by (X) bankruptcy, insolvency, reorganization, moratorium or similar Laws (as hereinafter defined) relating to or affecting generally the enforcement of creditors' interests and (Y) the availability of equitable remedies (whether in a proceeding in equity or at law). All necessary corporate action has been taken by and on behalf of each of PPC and Seller with respect to the authorization, execution, delivery and performance of this Agreement. Neither the execution and delivery of this Agreement by either of PPC or Seller nor the performance of its obligations hereunder will (A) violate, conflict with or result in a breach of any law, statute, code, ordinance, rule, regulation, treaty, convention or other requirement or any governmental authority ("Laws") binding on either of PPC or Seller or to which the Subject Assets are subject or any order, judgment, injunction, award, decree, ruling, charge or writ of any governmental authority ("Orders") binding on either of PPC or Seller or to which the Subject Assets are subject or either PPC's or Seller's certificate of incorporation or bylaws, (B) violate, conflict with or result in a breach or termination of, or otherwise give any contracting party additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of, any note, deed, lease, instrument, security agreement, mortgage, commitment, contract, agreement, license or other instrument (collectively, "Contracts") to which either of PPC or Seller is a party or by which any 5 14 of the Subject Assets is bound, or (C) result in the creation or imposition of any liens, security interest, mortgage, pledge, hypothecation easement or conditional sale or other title retention document, defect in title, restrictive covenant, option to purchase, restriction on sale or other restriction on title, use, operation or voting ("Liens") on the Subject Assets, other than Liens and Contracts created or entered into by any of Purchasers. (iv) TITLE TO SUBJECT ASSETS. Except as set forth in a schedule attached to this Agreement which references a specific Article, paragraph or clause of this Agreement, Seller (A) is the record and beneficial owner of all of the Subject Assets, (B) has full power, right and authority, and any approval required by Law or any Order, to sell, assign, transfer and deliver the Subject Assets to Purchasers, and (C) has title to the Subject Assets (other than the Coal Leases and Fee Properties) free and clear of all (i) Liens, (ii) authorized or outstanding options, plans, offers, warrants, conversion or exchange rights, calls, Contracts, subscriptions, preemptive rights, or other rights or agreements of similar nature ("Options"), or (iii) other Contracts restricting the right of Seller, or obligating Seller, to transfer or sell any Subject Assets. Except as set forth in a schedule attached to this Agreement which references a specific Article, paragraph or clause of this Agreement, upon the consummation of the transactions contemplated by this Agreement in accordance with the terms hereof, each Purchaser shall acquire title to the Subject Assets (other than the Coal Leases and Fee Properties) being purchased and acquired by it, free and clear of all Liens, Options and Contracts, and such Purchaser shall become the sole record and beneficial owner of such Subject Assets, other than due to Liens, Options and Contracts created or entered into by such Purchaser. (v) CONSENTS. Except as set forth on SCHEDULE IV(a)(v), no Consent is required to be obtained by PPC or Seller in connection with the execution and delivery by PPC or Seller of this Agreement or the consummation of the transactions contemplated hereby. (vi) LITIGATION. There is no suit, action, proceeding, claim, demand, proceeding or investigation ("Litigation") pending, or to the Knowledge (as hereinafter defined) of PPC or Seller, threatened against PPC or Seller which seeks to restrain or prohibit or otherwise challenges the consummation, legality or validity of this Agreement or the transactions contemplated hereby, or if pursued and/or resulting in an Order, would have a material adverse effect on the right or ability of such Seller to sell the Subject Assets or consummate any of the other transactions contemplated hereby. (vii) NO BROKERS OR FINDERS. Except for Chase Securities Inc., the fees of which shall be paid by PPC or Seller, neither PPC nor Seller has employed any broker, agent or finder in connection with the transaction contemplated by this Agreement. (b) REPRESENTATIONS REGARDING THE JOINT VENTURE INTERESTS. Except as set forth in the schedules attached to this Agreement which are expressly referenced in this Article IV(b): (i) NO DEFAULT OR BREACH. To the Knowledge of PPC and Seller, there exists no material default or breach by Seller under any of the Contracts set forth on Schedule IV(b)(i), which Schedule lists all of the Contracts relating to either of the Joint Ventures and to which Seller is a party. 6 15 (ii) DISCLOSURE. To the Knowledge of PPC and Seller, NACoal has been provided with all material information in the possession of PPC or Seller and not previously in the possession of NACoal pertaining to either of the Red River Interest and the Mississippi Lignite Interest, including without limitation internal projections or forecasts relating to such Subject Assets, and all such information is complete and accurate in all material respects. To the Knowledge of PPC and Seller, none of such information contains any untrue statements of a material fact or omits to state a material fact necessary to make the statements contained therein not misleading. (iii) JOINT VENTURE ASSETS. To the Knowledge of PPC and Seller, neither of the Joint Ventures uses, possesses, has control over or has any claim or right to any assets or properties, real or personal, tangible or intangible, which are necessary or useful to the conduct of its business as now conducted or as proposed to be conducted which are owned by, controlled by, or titled in the name of Seller, either alone or together with any other person. (iv) DEFINITION OF KNOWLEDGE. As used in this Agreement, "Knowledge" shall mean the actual knowledge of any officer or director of PPC or any manager, officer or director of Seller or what such individual, but for grossly negligent, reckless or intentional conduct, should have known. (c) REPRESENTATIONS REGARDING LAND MANAGEMENT COMPANY. Except as set forth in the schedules attached to this Agreement which are expressly referenced in this Article IV(c): (i) ORGANIZATION, GOOD STANDING AND FOREIGN QUALIFICATION. Land Management Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. Land Management Company has the corporate power and authority to own, operate and lease its properties and to carry on its business as presently being conducted. Land Management Company is duly qualified to do business and is in good standing in the States of Louisiana, Mississippi, Tennessee and Texas, those being the only jurisdictions in which such qualification is necessary to carry on its business as presently conducted. (ii) CAPITALIZATION. The authorized capital stock of Land Management Company consists of 1000 shares of Common Stock, without par value, of which ten (10) shares (the "Shares") are issued and outstanding, all of which have been duly issued and are fully paid and nonassessable. All of the Shares are owned of record and beneficially by Seller. (iii) OPTIONS OR OTHER RIGHTS. Except for the Shares, (A) there is no issued and outstanding capital stock or other securities (whether debt, equity or a combination thereof) of Land Management Company; (B) there are no restrictions or other obligations with respect to the sale or transfer of any of such Shares, or evidencing the right to issue or to subscribe for any of such Shares, or giving any person any rights with respect to such Shares or, in each case, any other capital stock or other securities (whether debt, equity or a combination thereof) of Land Management Company; (C) there are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to Land Management Company; and (D) there are no voting trusts, proxies or other agreements or understandings with respect to the voting of the capital stock of Land Management Company. 7 16 (iv) TITLE TO REAL PROPERTY. Seller has made available to NACoal all documents in possession of Land Management Company relating to Land Management Company's title to all real property, coal rights, mineral estates, surface estates, coal leases, coal subleases, surface leases, mining rights, water rights, surface disturbance consents, easements, rights of way, access rights, non-operating interests (including rights to advance royalties, production royalties and production payments) and other rights or interests in real property, permits and licenses, personal property, all geological and geophysical databases, Contracts and all other assets of Land Management Company (the "Land Management Assets"; provided, however that the Land Management Assets do not include that certain non-operating interest relating to the Calvert Lignite Mine located in Robertson, Texas and operated by Walnut Creek Mining Company, a Texas joint venture between Seller and KT Mining Company, a Delaware corporation). Except as disclosed in SCHEDULE IV(c)(iv), Land Management Company (A) is the record and beneficial owner of all of the Land Management Assets, and (B) has title to the Land Management Assets (other than the Leasehold Assets (as hereinafter defined) and the Land Management Assets constituting real property owned in fee) free and clear of all (i) Liens and Taxes, (ii) Options, or (iii) other Contracts. None of the Land Management Assets is encumbered by any Lien created by, through or under Land Management Company or its affiliates, except (x) for the Lien for real property or ad valorem taxes that are not then due and payable and (y) as set forth on SCHEDULE IV(c)(iv). Except as disclosed in SCHEDULE IV(c)(iv), there are no Contracts entered into by Land Management Company or its affiliates with third parties (or affiliates) relating to the Land Management Assets obligating Land Management Company to make payments with respect to overriding royalties or similar burdens against production from the Land Management Assets, creating preferential rights to purchase the Land Management Assets, or dedicating the coal reserves beneath the Land Management Assets to any particular Contract or sale. Except as disclosed in SCHEDULE IV(c)(iv), Land Management Company is not in breach or default of any royalty, rental or other payment obligation under any of the Leasehold Assets (as hereinafter defined). (v) QUIET ENJOYMENT. Land Management Company is in material compliance with and enjoying quiet possession with respect to each of the Land Management Assets to which it is a party constituting a lease or sublease (collectively, the "Leasehold Assets"). Land Management Company has received no notice and is not aware of any claim, demand or suit by a lessor or sublessor of any of the Leasehold Assets claiming a material breach or default thereof or termination of such lease or sublease. (vi) DEFAULTS. Neither the execution and delivery of this Agreement by PPC or Seller nor the performance of their obligations hereunder constitute or will constitute a breach, default or event of default under any such Leasehold Assets. (vii) ENCUMBRANCES. Except as shown on SCHEDULES IV(c)(iv) and IV(c)(vii), none of the Land Management Assets is encumbered by any matter affecting title that materially and adversely affects the value of the Land Management Assets (considered as an entirety) so affected or the utility of the Land Management Assets (considered as an entirety) for the purposes to which NACoal would intend to devote the same. The matters described on SCHEDULE IV(c)(vii) shall be considered to be permitted exceptions to Land Management Company's title to the Land Management Assets. Notwithstanding the foregoing to the contrary, however, such matters described on SCHEDULE IV(c)(vii) do not materially and adversely affect the value of the 8 17 Land Management Assets (considered as an entirety) and do not materially and adversely impair the utility of the Land Management Assets (considered as an entirety) for the purpose to which NACoal would intend to devote the same. (viii) ENVIRONMENTAL MATTERS. (A) (1) Neither Land Management Company nor, to PPC's or Seller's Knowledge, any other person or entity has generated, manufactured, stored, transported, treated, recycled, disposed of or otherwise handled in any way any Hazardous Materials on, beneath or about any of the Land Management Assets; (2) to PPC's or Seller's Knowledge, there has not been a release or threat of release or discharge of Hazardous Materials into the soil, surface waters, groundwaters, drinking water supplies, navigable waters, land, surface or subsurface strata, ambient air or other environmental medium, whether or not yet discovered, on, beneath or about the Land Management Assets that has resulted in or could result in any damage, loss, cost, expense, claim, demand or liability to or against Land Management Company or any of its affiliates by any governmental authority or other third party, irrespective of the cause of such condition; (3) Land Management Company has not received any notice, complaint, order, directive or action from any governmental entity or private or public entity or person relating to Hazardous Materials or environmental problems, impairments or liabilities with respect to the Land Management Assets that would prohibit use of such Assets as contemplated by NACoal; (4) neither PPC nor Seller is aware of any regional contamination issues that could adversely affect the value of the Land Management Assets (considered as an entirety) for the use to which NACoal intends to devote the same; (5) to the Knowledge of PPC or Seller, none of the Land Management Assets is currently registered on the National Register of Historic Places pursuant to the National Historic Preservation Act, 16 U.S.C. Sec. 470 et seq. (or as an historic landmark) under any comparable state or local law), nor is any of the Land Management Assets eligible for any such registration; (6) to the Knowledge of PPC or Seller, none of the Land Management Assets constitutes a habitat for any species designated as threatened or endangered pursuant to the Endangered Species Act, 16 U.S.C. Sec. 1531 et seq.; (7) to the Knowledge of PPC or Seller, no "navigable waters," as such term is used in Section 404 of the Clean Water Act 33 U.S.C. Sec. 1441, are located on any of the Land Management Assets; (8) no underground or above-ground storage tanks or subsurface structures are, to the Knowledge of PPC or Seller, located on or under any of the Land Management Assets; (9) to the Knowledge of PPC or Seller, none of the Land Management Assets is (or with the passage of time and/or the giving of notice would be) subject to any private or governmental lien or claim relating to Hazardous Materials or environmental problems; (10) neither PPC nor Seller has any Knowledge of any pending legislation relating to environmental matters that would prohibit use of the Land Management Assets as contemplated by NACoal, and (11) to the Knowledge of PPC or Seller, none of the Land Management Assets is designated as lands unsuitable for surface coal mining operations or as areas where such mining operations are prohibited or limited by the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. Sec. 1201 ET SEQ., the Louisiana Surface Mining and Reclamation Act, La. Rev. Stat. Ann. Sec. 30-901 ET SEQ., or the Texas Surface Coal Mining and Reclamation Act, Tex. Nat. Resources Code Ann. Sec. 134.001 ET SEQ., except for setback and similar limitations affecting the right to mine within minimum distances of highways, pipelines, oil facilities or gas facilities or other spacing requirements. (B) As used in this Agreement, "Hazardous Materials" shall mean (1) any "Hazardous Substance," "Pollutant or Contaminant" (as such terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601 et 9 18 seq. as amended ("CERCLA")), or (2) any other chemical, substance, material, object, condition, waste, pollutant or combination thereof that is or may be hazardous to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, infectiousness or other harmful properties or effects and all of those chemicals, substances, materials, objects, conditions, wastes, pollutants or combinations thereof that are listed, defined or regulated by any federal, state or local law based upon, directly or indirectly, such properties or effects. (ix) CONSENTS. No Consents are required to be obtained by Land Management Company in connection with the execution and delivery by PPC or Seller of this Agreement or the consummation of the transactions contemplated hereby. (x) LITIGATION. There are no Orders or Litigation by Land Management Company or against Land Management Company or any of its assets either pending or, to the Knowledge of PPC or Seller, threatened, which involve a material amount of the property and assets, or material rights or obligations, of Land Management Company. (xi) LAND MANAGEMENT COMPANY NON-OPERATING INTERESTS. Each of the obligations to Land Management Company under each of the non-operating interests included within the Land Management Assets constitutes a valid and binding obligation and is enforceable by Land Management Company in accordance with its terms, except as such enforceability may be limited by (X) bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting generally the enforcement of creditors' interests and (Y) the availability of equitable remedies (whether in a proceeding in equity or at law). Each of the parties with obligations to Land Management Company under a non-operating interest which constitutes a Land Management Asset has performed all of its obligations under, or is otherwise in compliance with all of its obligations under, such non-operating interest. (xii) NO DEFAULT OR BREACH IN LAND MANAGEMENT COMPANY NON-OPERATING INTERESTS. There exists no material default or breach with regard to any of the obligations under the non-operating interests included within the Land Management Assets, and no notice has been given or received claiming that any party with obligations to Land Management Company under any such non-operating interest has committed any such default or breach or indicating the desire or intention of Land Management Company to amend, modify, rescind or terminate the same and no event has occurred which, with notice or lapse of time, would constitute a breach or default, or permit or cause termination, modification or acceleration of any obligations under any such non-operating interests and no party benefiting from or having any obligation under any such non-operating interest has repudiated any provision of any such non-operating interest. (xiii) LIABILITIES AND OBLIGATIONS. Land Management Company has not incurred any liability or obligation whatsoever, whether known, due or to become due, accrued, absolute, contingent or otherwise, other than current liabilities incurred or accrued in the ordinary course of business consistent with the past practice of Land Management Company, and there has been no event, occurrence, change or set of circumstances or facts which could reasonably be expected to result in any such liability or obligation. 10 19 (d) REPRESENTATIONS REGARDING THE COAL LEASES, FEE PROPERTIES, NON-OPERATING INTERESTS AND THE EIGHT MILE VENTURE. Except as set forth in the schedules attached to this Agreement which are expressly referenced in this Article IV(d): (i) TITLE. Seller has made available to NACoal all documents in its possession relating to its title to the Coal Leases and the Fee Properties. None of the Coal Leases or the Fee Properties is encumbered by any Lien created by, through or under Seller or its affiliates, except (x) for the Lien for real property or ad valorem taxes that are not then due and payable and (y) as set forth on SCHEDULE IV(d)(i). Except as disclosed in SCHEDULE IV(d)(i), there are no Contracts entered into between Seller or its affiliates with third parties (or affiliates) relating to the Coal Leases or the Fee Properties creating overriding royalties or similar burdens against production from the Coal Leases or the Fee Properties, creating preferential rights to purchase the Coal Leases or the Fee Properties, or dedicating the coal reserves beneath the Coal Leases or Fee Properties to any particular Contract or sale. Except as disclosed in SCHEDULE IV(d)(i), Seller is not in breach or default of any royalty, rental or other payment obligation under any of the Coal Leases. (ii) QUIET ENJOYMENT. Seller is in material compliance with and enjoying quiet possession under each of the Coal Leases. Seller has received no notice and is not aware of any claim, demand or suit by a lessor or sublessor of any of the Coal Leases claiming a material breach or default thereof or termination of any such Coal Leases. (iii) DEFAULTS. Neither the execution and delivery of this Agreement by Seller nor the performance of its obligations hereunder constitutes or will constitute a breach, default or event of default under any such Coal Leases. (iv) ENCUMBRANCES. Except as shown on SCHEDULES IV(d)(i) and IV(d)(iv), none of the Coal Leases or Fee Properties are encumbered by any matter affecting title that materially and adversely affects the value of the Coal Leases and the Fee Properties (considered as an entirety) so affected or the utility of the Coal Leases and the Fee Properties (considered as an entirety) for the purposes to which NACoal would intend to devote the same. The matters described on SCHEDULE IV(d)(iv) shall be considered to be permitted exceptions to Seller's title to the Coal Leases and the Fee Properties. Notwithstanding the foregoing to the contrary, however, such matters described on SCHEDULE IV(d)(iv) do not materially and adversely affect the value of the Coal Leases and the Fee Properties (considered as an entirety) and do not materially and adversely impair the utility of the Coal Leases and the Fee Properties (considered as an entirety) for the purpose to which NACoal would intend to devote the same. (v) ENVIRONMENTAL MATTERS. (1) Neither Seller nor, to PPC's or Seller's Knowledge, any other person or entity has generated, manufactured, stored, transported, treated, recycled, disposed of or otherwise handled in any way any Hazardous Materials on, beneath or about any of the Coal Leases or Fee Properties; (2) to PPC's or Seller's Knowledge, there has not been a release or threat of release or discharge of Hazardous Materials into the soil, surface waters, groundwaters, drinking water supplies, navigable waters, land, surface or subsurface strata, ambient air or other environmental medium, whether or not yet discovered, on, beneath or about the Coal Leases or Fee Properties that has resulted in or could result in any damage, loss, cost, expense, claim, demand or liability to or against Seller or any of its affiliates by any 11 20 governmental authority or other third party, irrespective of the cause of such condition; (3) Seller has not received any notice, complaint, order, directive or action from any governmental entity or private or public entity or person relating to Hazardous Materials or environmental problems, impairments or liabilities with respect to the Coal Leases or Fee Properties that would prohibit use of the Coal Leases or Fee Properties as contemplated by NACoal; (4) neither PPC nor Seller is aware of any regional contamination issues that could adversely affect the value of the Coal Leases and the Fee Properties (considered as an entirety) for the use to which NACoal intends to devote the same; (5) to the Knowledge of PPC or Seller, none of the Coal Leases or Fee Properties is currently registered on the National Register of Historic Places pursuant to the National Historic Preservation Act, 16 U.S.C. Sec. 470 et seq. (or as an historic landmark) under any comparable state or local law), nor is any of the Coal Leases or Fee Properties eligible for any such registration; (6) to the Knowledge of PPC or Seller, none of the Coal Leases or Fee Properties constitutes a habitat for any species designated as threatened or endangered pursuant to the Endangered Species Act, 16 U.S.C. Sec. 1531 et seq.; (7) to the Knowledge of PPC or Seller, no "navigable waters," as such term is used in Section 404 of the Clean Water Act 33 U.S.C. Sec. 1441, are located on any of the Coal Leases or Fee Properties; (8) no underground or above-ground storage tanks or subsurface structures are, to the Knowledge of PPC or Seller, located on or under any of the Coal Leases or Fee Properties; (9) to the Knowledge of PPC or Seller, none of the Coal Leases or Fee Properties is (or with the passage of time and/or the giving of notice would be) subject to any private or governmental lien or claim relating to Hazardous Materials or environmental problems; (10) neither PPC nor Seller has any Knowledge of any pending legislation relating to environmental matters that would prohibit use of the Coal Leases or Fee Properties as contemplated by NACoal; and (11) to the Knowledge of PPC or Seller, none of the Coal Leases or Fee Properties is designated as lands unsuitable for surface coal mining operations or as areas where such mining operations are prohibited or limited by the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. Sec. 1201 ET SEQ., the Louisiana Surface Mining and Reclamation Act, La. Rev. Stat. Ann. Sec. 30-901 ET SEQ., the Mississippi Surface Coal Mining and Reclamation Law, Miss. Code Ann. Sec. 53-91 ET SEQ., the Coal Surface Mining Act of 1987, Tenn. Code Ann. Sec. 59-8-401, or the Texas Surface Coal Mining and Reclamation Act, Tex. Nat. Resources Code Ann. Sec. 134.001 ET SEQ., except for setback and similar limitations affecting the right to mine within minimum distances of highways, pipelines, oil facilities or gas facilities or other spacing requirements. (vi) NON-OPERATING INTERESTS. Each of the obligations to Seller under each of the Non-Operating Interests constitutes a valid and binding obligation and is enforceable by Seller in accordance with its terms, except as such enforceability may be limited by (X) bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting generally the enforcement of creditors' interests and (Y) the availability of equitable remedies (whether in a proceeding in equity or at law). Each of the parties with obligations to Seller under a Non-Operating Interest has performed all of its obligations under, or is otherwise in compliance with all of its obligations under, such Non-Operating Interest. (vii) NO DEFAULT OR BREACH IN NON-OPERATING INTERESTS. There exists no material default or breach with regard to any of the obligations under the Non-Operating Interests, and no notice has been given or received claiming that any party with obligations to Seller under a Non-Operating Interest has committed any such default or breach or indicating the desire or intention of Seller to amend, modify, rescind or terminate the same, and no event has occurred which, with 12 21 notice or lapse of time, would constitute a breach or default, or permit or cause termination, modification or acceleration of any obligations under any such Non-Operating Interest and no party benefiting from or having any obligation under any such Non-Operating Interest has repudiated any provision of any such Non-Operating Interest. (viii) NORIT AGREEMENTS. There are no Contracts relating to the Eight Mile Venture except those set forth on SCHEDULE VI(a)(4)(iv). Each of the obligations to Seller under each of such Contracts constitutes a valid and binding obligation and is enforceable by Seller in accordance with its terms, except as such enforceability may be limited by (X) bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting generally the enforcement of creditors' interests and (Y) the availability of equitable remedies (whether in a proceeding in equity or at law). Each of such Contracts is in full force and effect, and Seller has performed all of its obligations under, or is otherwise in compliance, with each of such Contracts. (ix) NO DEFAULT OR BREACH IN NORIT AGREEMENTS. There exists no material default or breach by Seller under any of the Contracts set forth on SCHEDULE VI(a)(4)(iv) or by any other party thereto, and Seller has not received any notice claiming that it has committed any such default or breach or indicating the desire or intention of any party thereto to amend, modify, rescind or terminate the same, and no event has occurred which, with notice or lapse of time, would constitute a breach or default, or permit termination, modification or acceleration, under any such Contract and no party to any such Contract has repudiated any provision of such Contract. (x) DISCLOSURE. NACoal has been provided with all material information in the possession of PPC or Seller pertaining to the Eight Mile Venture, including without limitation, internal projections or forecasts relating to such Subject Asset, and all such information is complete and accurate in all material respects. None of such information contains any untrue statements of material fact or omits to state a material fact necessary to make misstatements contained therein not misleading. (xi) LIABILITIES AND OBLIGATIONS. There are no liabilities or obligations whatsoever, whether known, due or to become due, accrued, absolute, contingent or otherwise, of Seller relating to or arising out of the Eight Mile Venture. (e) REPRESENTATIONS REGARDING POWER PROJECT INTEREST. Except as set forth in the schedules attached to this Agreement which are expressly referenced in this Article IV(e): (i) POWER PROJECT INTEREST CONTRACTS. There are no Contracts relating to the Power Project Interest except those set forth on SCHEDULE IV(e)(i). Each of such Contracts is in full force and effect, and Seller has performed all of its obligations under, or is otherwise in compliance with each of such Contracts. (ii) NO DEFAULT OR BREACH. There exists no material default or breach by Seller under any of the Contracts set forth on SCHEDULE IV(e)(i) or by any other party thereto, and Seller has not received any notice claiming that it has committed any such default or breach or indicating the desire or intention of any party thereto to amend, modify, rescind or terminate the 13 22 same, and no event has occurred which, with notice or lapse of time, would constitute a breach or default, or permit termination, modification or acceleration, under any such Contract and no party to any such Contract has repudiated any provision of such Contract. (iii) DISCLOSURE. NACoal has been provided with all material information in the possession of PPC or Seller pertaining to the Power Project Interest, including without limitation, internal projections or forecasts relating to such Subject Asset, and all such information is complete and accurate in all material respects. None of such information contains any untrue statements of material fact or omits to state a material fact necessary to make misstatements contained therein not misleading. (iv) LIABILITIES AND OBLIGATIONS. There are no liabilities or obligations whatsoever, whether known, due or to become due, accrued, absolute, contingent or otherwise, of Seller relating to or arising out of the Power Project Interest. (f) REPRESENTATIONS REGARDING THE MISCELLANEOUS ASSETS, THE OFFICE LEASE AND THE SUBLEASE. Except as set forth in the schedules to this Agreement which are expressly referenced in this Article IV(f): (i) RECORDS. All of the title records, prospect and lease files and other data and documents (collectively, "Records") described on SCHEDULE VI(a)(6) constitute all of the Records owned by Seller relating to the Coal Leases, Fee Properties, Non-Operating Interests or Land Management Assets. (ii) OFFICE LEASE. Seller currently occupies Suite 200 of a certain office building located at 2929 North Central Expressway, Richardson, Texas 75080-2043 under an oral arrangement with PPC which leases such Suite plus more space at such building under an Office Lease Agreement dated April 24, 1991 between 2929 Partners, Ltd., successor-in-interest to State Mutual Life Assurance Co. of America (the "Landlord"), and PPC (the "Office Lease"). The Office Lease has been duly authorized, executed and delivered by each of the parties thereto, constitutes a valid and binding obligation of each of the parties thereto, and is enforceable against each of such parties in accordance with its terms, except as such enforceability may be limited by (X) bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors' interests and (Y) the availability of equitable remedies (whether in a proceeding, in equity or at law). The Office Lease is in full force and effect, and each of such parties thereto has performed all of its obligations under, or is otherwise in compliance with, the Office Lease. PPC is enjoying quiet possession under the Office Lease. (iii) NO DEFAULT OR BREACH UNDER OFFICE LEASE. There exists no default or breach by any of the parties to the Office Lease, and none of such parties has received any notice claiming that it has committed any such default or breach or indicating a desire or intention of any other party thereto to amend, modify, rescind or terminate the same and no event has occurred which, with notice or lapse of time, would constitute a breach or default, or permit or cause termination, modification or acceleration, under the Office Lease, and no party to the Office Lease has repudiated any provision of the Office Lease. 14 23 (iv) OWNED FIXTURES AND PERSONAL PROPERTY. SCHEDULE VI(a)(6) includes a complete and accurate list of all fixtures and personal property, including but not limited to all machinery and equipment, office furniture and equipment and vehicles (collectively, "Fixtures and Personal Property"), which is owned by Seller and used at the office space covered by the Office Lease, as well as a depreciation schedule for such assets. All of such assets are in good operating condition, ordinary wear and tear excepted, and all have been maintained, repaired and replaced consistent with Seller's past practice. (v) LEASED FIXTURES AND PERSONAL PROPERTY. SCHEDULE VI(a)(6) includes a complete list of all leases of Fixtures and Personal Property located at the office space which is subject to the Office Lease and with respect to which Seller is a lessee, including respective expiration dates and monthly rentals for each such asset. (vi) SUBLEASE. The Sublease has been duly authorized by PPC, and assuming the due execution and delivery thereof by PPC and NACoal, shall constitute the legal, valid and binding obligation of PPC, enforceable against PPC in accordance with its terms except as such enforceability may be limited by (X) bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or affecting generally the enforcement of creditors interests and (Y) the availability of equitable remedies (whether in a proceeding in equity or at law). PPC has the corporate power and authority to enter into the Sublease and to undertake and perform fully the transactions contemplated thereby. All necessary corporate action has been taken by and on behalf of PPC with respect to the authorization, execution, delivery and performance of the Sublease. Neither the execution and delivery of the Sublease by PPC nor the performance of its obligations thereunder will (i) violate, conflict with or result in a breach of any Law or any Orders applicable to PPC or its certificate of incorporation or bylaws, or (ii) violate, conflict with or result in a breach or termination of, or otherwise give any contracting party additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of, any contracts to which PPC is a party or by which PPC is bound which would prevent the consummation by PPC of the transactions contemplated by the Sublease. (g) TAX REPRESENTATIONS. With respect to each of Seller and Land Management Company that, except as set forth on SCHEDULE IV(g): (i) TAX RETURNS. All Tax Returns (as hereinafter defined) that are or were required to be filed on or before the Closing Date by or with respect to either of such persons have been or will be timely filed (or a filing extension from the appropriate Taxing Authority (as hereinafter defined) has been or will have been obtained) and are or will be true and correct in all material respects. All Taxes (as hereinafter defined) owed by either of such persons for the taxable period covered by each such Tax Return (whether or not shown on such Tax Return) have been or will be duly and timely paid in full on or before the Closing Date. No claim has ever been made by any Taxing Authority in a jurisdiction where either of such persons does not file Tax Returns that it is or may be subject to Tax in such jurisdiction. No assets of either of such persons is subject to any Liens, whether or not perfected, for any Taxes. (ii) AUDITS, CLAIMS, WAIVERS. No Tax Return filed by either of such persons is currently being audited or examined by any Taxing Authority. There are no unsatisfied claims or 15 24 deficiencies against either of such persons for Taxes. None of such persons has given any waiver or extension (or is subject to a waiver or extension given by any other person) of any statute of limitations relating to the assessment or collection of any Taxes which has not by its terms either expired or been terminated. (iii) PAYMENTS. Each payment of Current Period Taxes (as hereinafter defined), whether actual or estimated, payable by each of such persons has been or will be timely paid by it before the date on which such payment is required to be made and in an amount sufficient to avoid the imposition of any penalty. (iv) WITHHOLDING. Each of such persons has withheld and timely paid, or will withhold and timely pay, all Taxes required to be withheld and paid in connection with amounts paid before or on the Closing Date to (A) any employee of either of such persons or (B) any person entitled to receive any form of mineral royalty payment from either of such persons. (v) AFFILIATED GROUPS. Neither of such persons has ever been a member of an affiliated group filing a consolidated, combined or unitary income or franchise Tax Return for state or local tax purposes, and neither of such persons has any liability for any state or local Taxes of any other person. (vi) TAX SHARING AGREEMENTS. Neither of such persons is a party to any tax sharing agreement or arrangement that will require any payment by either of such persons after the Closing. (vii) POWERS OF ATTORNEY. No power of attorney currently in force has been granted by either of such persons which will be binding on either of such persons or any of Purchasers after the Closing. Neither of such persons has entered into a closing agreement with any Taxing Authority which will have continuing effect on such person, any of Purchasers or any affiliate of any of Purchasers after the Closing. (viii) TAX DEFINITIONS. For purposes of this Article IV(g) and Article XIII of this Agreement: (A) The term "Tax" means (1) all taxes or other fiscal levies imposed by any governmental authority, domestic or foreign, including, without limitation, any net income, alternative or add-on minimum, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, registration, recording, documentary, conveyancing, gains, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other like assessment, together with any interest, penalty, addition to tax or additional amount imposed or assessed by any governmental authority with respect thereto; or (2) any liability for the payment of any amounts of the type described in (1) as a result of being a member of an affiliated, consolidated, combined or unitary group or being a party to any agreement under which liability is determined or taken account with reference to the liability of any other person; or (3) any liability for the payment of any amounts of the type described in (1) as a result of any express or implied obligation to indemnify any other person or as a result of being party to any other arrangement or agreement. 16 25 (B) The term "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. (C) The term "Current Period Tax" means, in the case of any taxable year which begins before and ends after the Closing Date, the total Tax attributable to the portion of such taxable year which ends on and includes the Closing Date. (D) The term "Taxing Authority" means a governmental body (whether federal, state, local, provincial or foreign) exercising taxing authority, including without limitation, the U.S. Internal Revenue Service. V. PURCHASERS' REPRESENTATIONS Each of Purchasers jointly and severally represents and warrants to and with PPC and Seller that: (a) ORGANIZATION, GOOD STANDING AND AUTHORITY. NACoal is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; and each of Oxbow and Red Hills is a limited liability company duly formed, validly existing and in good standing under laws of the state of its formation. Each of Purchasers has the power and authority (corporate or limited liability company, as the case may be) to own, operate and lease its properties and to carry on its business as presently being conducted. Each of Purchasers is duly qualified to do business and is in good standing in each jurisdiction necessary for such Purchaser to consummate the transactions contemplated by this Agreement. (b) AUTHORIZATION, VALIDITY AND NON-CONTRAVENTION. This Agreement has been duly and validly executed and delivered by each of Purchasers and, assuming the due execution thereof by PPC and Seller, constitutes the legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms except as such enforceability may be limited by (X) bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or affecting generally the enforcement of creditors interests and (Y) the availability of equitable remedies (whether in a proceeding in equity or at law). Each of Purchasers has the power and authority (corporate or limited liability company, as the case may be) to enter into this Agreement and to undertake and perform fully the transactions contemplated hereby. All necessary action (corporate or limited liability company, as the case may be) has been taken by and on behalf of each of Purchasers with respect to the authorization, execution, delivery and performance of this Agreement. Neither the execution and delivery of this Agreement by any of Purchasers nor the performance of its obligations hereunder will (i) violate, conflict with or result in a breach of any Law or any Orders applicable to such Purchaser or its certificate of incorporation or bylaws, or (ii) violate, conflict with or result in a breach or termination of, or otherwise give any contracting party additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of, any Contracts to which such Purchaser is a party or by which such Purchaser is bound which would prevent the consummation by such Purchaser of the transactions contemplated by this Agreement. 17 26 (c) NO BROKERS OR FINDERS. None of Purchasers has employed any broker, agent or finder in connection with the transactions contemplated by this Agreement. (d) CONSENTS. No Consents are required to be obtained by any of Purchasers in connection with the execution and delivery by such Purchaser of this Agreement or the consummation of the transactions contemplated hereby. (e) SUBLEASE. The Sublease has been duly authorized by NACoal, and assuming the due execution and delivery thereof by PPC and NACoal, shall constitute the legal, valid and binding obligation of NACoal, enforceable against NACoal in accordance with its terms except as such enforceability may be limited by (X) bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or affecting generally the enforcement of creditors interests and (Y) the availability of equitable remedies (whether in a proceeding in equity or at law). NACoal has the corporate power and authority to enter into the Sublease and to undertake and perform fully the transactions contemplated thereby. All necessary corporate action has been taken by and on behalf of NACoal with respect to the authorization, execution, delivery and performance of the Sublease. Neither the execution and delivery of the Sublease by NACoal nor the performance of its obligations thereunder will (i) violate, conflict with or result in a breach of any Law or any Orders applicable to NACoal or its certificate of incorporation or bylaws, or (ii) violate, conflict with or result in a breach or termination of, or otherwise give any contracting party additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of, any Contracts to which NACoal is a party or by which NACoal is bound which would prevent the consummation by NACoal of the transactions contemplated by the Sublease. VI. THE SUBJECT ASSETS (a) SUBJECT ASSETS. The assets being sold hereunder and which are referred to as the "Subject Assets" consist of the following: 1. RED RIVER MINING COMPANY. The interest of Seller in that certain joint venture ("Red River Mining Company") established pursuant to that certain agreement made and effective as of September 1, 1988, as amended (the "Red River Joint Venture Agreement"), by and between Seller and NACoal, which interest includes all of Seller's rights under the Contracts listed on SCHEDULE IV(b)(i) relating to Red River Mining Company and all of Seller's right, title and interest in and to Seller's capital account, Seller's rights in and to specific Red River Mining Company assets and properties (if any), rights to participate in the management of Red River Mining Company, rights to distributions, reimbursements or other payments (including distributions of cash flow for the period between the close of business on August 31, 2000, and the Closing Date which have not been distributed), rights to profits, losses and other allocations and all other rights and benefits of Seller of every description whatsoever belonging or accruing to the benefit of Seller in Red River Mining Company (the "Red River Interest"). Notwithstanding anything contained herein to the contrary, no Purchaser is assuming any liability or obligation (whether absolute, contingent, known or unknown) arising out of Seller's interest in or relating to Red River Mining Company and existing prior to Closing. 18 27 2. MISSISSIPPI LIGNITE MINING COMPANY. The interest of Seller in that certain joint venture ("Mississippi Lignite Mining Company") established pursuant to that certain agreement made and effective as of September 12, 1997, as amended (the "Mississippi Lignite Joint Venture Agreement"), by and between Seller and NACoal, which interest includes all of Seller's rights, under the Contracts listed on SCHEDULE IV(b)(i) relating to Mississippi Lignite Mining Company and all of Seller's right, title and interest in and to Seller's capital account, Seller's rights in and to specific Mississippi Lignite Mining Company assets and properties (if any), rights to participate in the management of Mississippi Lignite Mining Company, rights to distributions, reimbursements or other payments (including distributions of cash flow for the period between the close of business on August 31, 2000, and the Closing Date which have not been distributed), rights to profits, losses and other allocations and all other rights and benefits of Seller of every description whatsoever belonging or accruing to the benefit of Seller in Mississippi Lignite Mining Company (the "Mississippi Lignite Interest"). Notwithstanding anything contained herein to the contrary, no Purchaser is assuming any liability or obligation (whether absolute, contingent, known or unknown) arising out of Seller's interest in or relating to Mississippi Lignite Mining Company and existing prior to Closing. 3. SHARES OF LAND MANAGEMENT COMPANY. All of the issued and outstanding shares of capital stock of Phillips Coal Land Management Corporation, a Nevada corporation ("Land Management Company"). 4. COAL LEASES, FEE PROPERTIES, NON-OPERATING INTERESTS AND THE EIGHT MILE VENTURE. All of Seller's right, title and interest in and to: (i) the coal leases and subleases owned by Seller and listed in SCHEDULE VI(a)(4)(i) including, without limitation, all of Seller's right, title and interest in the leasehold estates created thereunder (the "Coal Leases"), (ii) the real properties and associated mining rights owned in fee by Seller and listed in SCHEDULE VI(a)(4)(ii) (the "Fee Properties"), (iii) the non-operating interests owned by Seller and listed on SCHEDULE VI(a)(4)(iii) (the "Non-Operating Interests"); and (iv) that certain joint venture (the "Eight Mile Venture") established pursuant to that certain agreement made and effective as of May 30, 2000, as amended (the "Eight Mile Joint Venture Agreement"), by and between Seller and Norit Americas Inc., which interest includes all of Seller's rights under the Contracts listed on SCHEDULE VI(a)(4)(iv) and all of Seller's right, title and interest in and to Seller's capital account, Seller's rights in and to specific Eight Mile Venture assets and properties (if any), rights to participate in the management of the Eight Mile Venture, rights to distributions, reimbursements or other payments, rights to profits, losses and other allocations and all other rights and benefits of Seller of every description whatsoever belonging or accruing to the benefit of Seller in the Eight Mile Venture (the "Eight Mile Venture Interest"); provided, however, that notwithstanding the foregoing, no Purchaser is assuming any liability or obligations (whether absolute, contingent, known or unknown) arising out of or relating to the Coal Leases, Fee Properties, Non-Operating Interests or Seller's interest in or relating to the Eight Mile Venture and existing prior to Closing. 5. POWER PROJECT INTEREST. All of Seller's right, title and interest in and to its interest in future power projects located in Choctaw County, Mississippi, as described in the second sentence of paragraph 7 of that certain letter agreement between Seller and CRSS, Inc., a Delaware corporation, dated December 12, 1996 ("Power Project Interest"); provided, however that no Purchaser is assuming any liability or obligation (whether absolute, contingent, known or unknown) arising out of or relating to the Power Project Interest and existing prior to Closing. 19 28 6. MISCELLANEOUS ASSETS. All of Seller's right, title and interest in and to the assets and properties listed or otherwise described on SCHEDULE VI(a)(6) ("Miscellaneous Assets"); provided, however, that notwithstanding the foregoing, no Purchaser is assuming any liability or obligation (whether absolute, contingent, known or unknown) arising out of or relating to such Miscellaneous Assets and existing prior to Closing. Such liabilities and obligations in the foregoing proviso, in the provisos to Articles VI(a)(4) and VI(a)(5) and in the last sentences of Article VI(a)(1) and (2) are referred to collectively as the "Excluded Liabilities"; provided, however, that the Excluded Liabilities do not include any liability or obligation of either of Red River Mining Company or Mississippi Lignite Mining Company under applicable law to perform reclamation of surface lands disturbed in connection with its mining operations. VII. CONSENTS TO ASSIGNMENTS AND SUBLEASES (a) NO ASSIGNMENT. To the extent that any of the Subject Assets assigned hereunder is not assignable without the consent of another party, or to the extent that the execution of the Sublease by PPC requires the Landlord's consent, and any such consent has not been obtained at or prior to the Closing (even though each of PPC and Seller will use its best efforts to obtain such consents), this Agreement shall not constitute an assignment or an attempted assignment or sublease or attempted sublease if such assignment or attempted assignment or sublease or attempted sublease would constitute a breach thereof. SCHEDULE IV(a)(v) hereto includes an identification of each of the Subject Assets that are not assignable without the consent of another party and indicates in each case whether such consent has been obtained. In addition, such Schedule indicates whether the Sublease requires the consent of the Landlord under the Office Lease and whether such consent has been obtained. Each of PPC and Seller agrees to use its best efforts to obtain the consent of such other party to such assignments and to the Sublease, in all cases in which such consent is required. Until such consent has been obtained, or if such consent is not obtained, each of PPC and Seller will cooperate with Purchasers in any reasonable arrangements designed to provide Purchasers the benefits under any such Subject Assets and the Office Lease, including enforcement, to the extent reasonable, at the cost and for the account of Purchasers, of any and all rights of Seller against the other party thereto arising out of the failure of such other party to perform its obligations thereunder or otherwise. (b) FURTHER ASSURANCES. Each of PPC and Seller hereby agrees that, from time to time after the Closing, upon the reasonable request of Purchasers, it will execute and deliver, or cause to be executed and delivered, all such other instruments of conveyance and transfer and will take such other action as Purchasers may reasonably request to vest more effectively in Purchasers' title to, and put Purchasers in possession of, any of the Subject Assets and the property to be subleased pursuant to the Sublease, and, in the case of any rights, if any, that cannot be transferred effectively without the consent of third parties, to assure to Purchasers the benefits thereof as contemplated by this Agreement. In furtherance of the foregoing, upon the reasonable request of Purchasers, each of PPC and Seller will, and will cause its employees, agents and consultants to, communicate in writing to Purchasers and their representatives all facts known to each of PPC and Seller respecting the Subject Assets and the property to be subleased pursuant to the Sublease, testify in any legal proceedings relating to or affecting the Subject Assets, sign all lawful papers, execute all division, continuation, substitution, renewal and reissue applications relating to or affecting the Subject Assets and the property to be subleased pursuant to the Sublease. 20 29 VIII. GUARANTIES OF PERFORMANCE (a) REPRESENTATION AND WARRANTY OF PPC. PPC has given certain guaranties of performance, performance bonds and other financial backstopping arrangements on behalf of Seller as listed on SCHEDULE VIII(a) (the "Guaranties") and represents and warrants to Purchasers that (i) it has performed all of its obligations under, or is otherwise in compliance with, each of such Guaranties, (ii) there exists no material default or breach by PPC thereunder, (iii) PPC has not received any notice claiming that it has committed any such default or breach or indicating the desire or intention of any party benefiting from such Guaranty to assert that PPC is obligated to perform under such Guaranty, and (iv) to the Knowledge of PPC no event has occurred which, with notice or lapse of time, might give rise to any such claim. (b) RELEASE. As long as the representation and warranty in Article VIII(a) continues to be true and correct in all material respects, (x) NACoal shall use reasonable efforts and cooperate with PPC and Seller to attempt to obtain the releases of all such Guaranties, and (y) NACoal shall, from and after Closing, defend, indemnify and hold harmless PPC from any and all loss, costs, damages or claims resulting from, or relating to, any such unreleased Guaranty; provided, however, that notwithstanding the foregoing, NACoal shall have no liability or obligation with respect to any Guaranty to the extent that it relates to any Excluded Liability. (c) EQUIPMENT LEASE GUARANTIES AND LETTER OF CREDIT SECURING RECLAMATION BOND. Subject to the proviso in Article VIII(b), in the case of that certain Lease Guaranty (Corporate), dated October 18, 1999 from PPC to ICX Corporation and that certain Guarantee Agreement, dated as of February 23, 1999 by PPC and NACoal in favor of Norlease, Inc. (collectively, the "Equipment Lease Guaranties"), and that certain Irrevocable Standby Letter of Credit dated August 21, 1999, in favor of Mississippi Department of Environmental Quality as security for the Mississippi Lignite Mining Company's Reclamation Bond ("Letter of Credit"), NACoal and PPC shall use reasonable efforts and cooperate with each other to obtain, by the Closing, releases of such Equipment Lease Guaranties and Letter of Credit and the replacement thereof with letters of credit or other similar arrangements on terms reasonably satisfactory to PPC, NACoal and the lessors under the equipment leases, in the case of the Equipment Lease Guaranties, and PPC, NACoal and the Mississippi Department of Environmental Quality in the case of the Letter of Credit. In consideration of NACoal obtaining such substitute letters of credit or other similar arrangements, PPC and Seller hereby agree that the sum of One Million Seventy-Six Thousand Dollars ($1,076,000) shall be deducted from the amount due at the Closing from Red Hills for the Mississippi Lignite Interest. IX. CONDITIONS OF CLOSING (a) PURCHASERS' CONDITIONS. The obligation of Purchasers to purchase and pay for the Subject Assets at the Closing is subject to the fulfillment or satisfaction, at or prior to the Closing, of the following conditions, any of which may be waived in whole or in part in writing by Purchasers: (i) DELIVERIES. PPC and Seller shall have delivered or caused to be delivered all of the items required by Article III(b) of this Agreement. All certificates, agreements, instruments and documents of PPC and Seller mentioned herein or incident to the transactions 21 30 provided for in this Agreement shall be reasonably satisfactory in form and substance to Purchasers. (ii) REPRESENTATIONS AND WARRANTIES AND COVENANTS. The representations and warranties set forth in Article IV and Article VIII shall be true and correct in all respects at and as of the Closing with the same force and effect as though made on and as of the Closing Date, except for those representations and warranties which speak as of a certain date in which case such representations and warranties shall be accurate as of that date. Each of PPC and Seller shall have performed or complied with all covenants and agreements contemplated by this Agreement to be performed by such party at or prior to the Closing. (iii) THIRD-PARTY CONSENTS. PPC and Seller shall have obtained all Consents that may be required in connection with the consummation of the transactions contemplated by this Agreement, including the Consents listed on SCHEDULE IV(a)(v). (iv) NO ORDERS. There shall be no Orders in effect preventing consummation of any of the transactions contemplated by this Agreement. (v) NO LITIGATION. No Litigation challenging the legality of, or seeking to restrain, prohibit or materially modify, the transactions provided for in this Agreement shall have been instituted and not settled or otherwise terminated. (vi) EQUIPMENT LEASE GUARANTIES AND LETTER OF CREDIT. PPC shall have been released from its obligations under the Equipment Lease Guaranties and Letter of Credit in accordance with Article VIII(c), and such Guaranties shall have been replaced by letters of credit or other similar arrangements in accordance with Article VIII(c). (b) CONDITIONS OF PPC AND SELLER. The obligations of PPC and Seller at the Closing are subject to the fulfillment or satisfaction, at or prior to the Closing, of the following conditions, any of which may be waived in whole or in part in writing by PPC and Seller: (i) REPRESENTATIONS AND WARRANTIES AND COVENANTS. The representations and warranties set forth in Article V shall be true and correct in all respects at and as of the Closing. Each of Purchasers shall have performed or complied with all covenants and agreements contemplated by this Agreement to be performed by it at or prior to the Closing. (ii) NO ORDERS. There shall be no Orders in effect preventing consummation of any of the transactions contemplated by this Agreement. (iii) DELIVERIES. Purchasers shall have delivered or caused to be delivered all of the items required by Article III(c) of this Agreement. All certificates, agreements, instruments and documents of Purchasers and mentioned herein or incident to the transactions contemplated hereby shall be reasonably satisfactory in form and substance to PPC and Seller. (iv) NO LITIGATION. No Litigation challenging the legality of, or seeking to restrain, prohibit or materially modify, the transactions provided for in this Agreement shall have been instituted and not settled or otherwise terminated. 22 31 (v) EQUIPMENT LEASE GUARANTIES AND LETTER OF CREDIT. PPC shall have been released from its obligations under the Equipment Lease Guaranties and Letter of Credit in accordance with Article VIII(c), and such Guaranties shall have been replaced by letters of credit or other similar arrangements in accordance with Article VIII(c). X. CERTAIN PRE-CLOSING OBLIGATIONS (a) ACTIONS REGARDING PRE-CLOSING COVENANTS. Each of the parties hereto shall use commercially reasonable efforts to take all action and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement. (b) CHANGES TO THE SUBJECT ASSETS. From the date hereof through the Closing Date, except as expressly provided by this Agreement or expressly approved in advance by Purchasers in writing, neither PPC nor Seller shall sell, transfer or assign any of the Subject Assets or permit the creation of any Lien with respect to the Subject Assets, and neither PPC nor Seller shall: (i) make any change in, or permit Land Management Company to make any change in, Land Management Company's authorized capital stock, including any issuance, sale, split or reclassification in respect of its outstanding capital stock or any other equity interests or securities (including evidences of indebtedness) of Land Management Company, or issue, sell or dispose of any capital stock, or grant any Options, to or enter into any other Contracts with respect to the purchase or other acquisition (including upon conversion or exercise) any of its capital stock or other securities; (ii) merge or consolidate Land Management Company, or permit Land Management Company to merge or consolidate, with any other person, permit Land Management Company to acquire any stock, business, or substantially all of the property or assets of any other person; (iii) permit Land Management Company to sell, transfer or dispose of any Land Management Asset; (iv) make any change in the certificate of incorporation or by-laws of Land Management Company; (v) cause, permit or suffer any changes in the Subject Assets other than changes in the ordinary course of business, none of which shall be materially adverse, or allow Land Management Company to cause, permit or suffer any changes in the Land Management Assets other than changes in the ordinary course of business, none of which shall be materially adverse; (vi) permit or suffer any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting any of the Subject Assets, or allow Land Management Company to permit or suffer any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting any of the Land Management Assets; 23 32 (vii) cause, permit or suffer any waiver, compromise or other settlement of any of its rights under any Contract which constitutes a Subject Asset, or allow Land Management Company to cause, permit or suffer any waiver, compromise or settlement of any of its rights under any Land Management Asset which constitutes a Contract; or (viii) solicit or negotiate with respect to or enter into any agreement or understanding to do any of the foregoing. (c) FULL ACCESS. Upon reasonable notice, PPC and Seller shall permit, and shall cause Land Management Company to permit, (i) representatives of Purchasers to have access, to the extent not prohibited by law, to all premises, properties (whether real, personal or otherwise), books, records (including tax records), Contracts and documents relating to the Subject Assets or Land Management Company, and (ii) Purchasers to cause an independent environmental consultant chosen by Purchasers to inspect, audit and test the Subject Assets and the Land Management Assets for the existence of any Hazardous Materials or any facts and circumstances that would constitute a breach of Article IV(c)(viii) or Article IV(d)(v). PPC and Seller shall further cause their managerial employees, counsel, environmental consultants and regular independent certified accountants to be available upon reasonable advance notice to answer questions of Purchasers concerning the Subject Assets or Land Management Company and, in the case of environmental consultants, to make available all environmental data and reports in their possession relating to Subject Assets or Land Management Company and, at Purchasers' sole election and expense, to update previously prepared environmental reports relating to the Subject Assets or Land Management Company. (d) NO SHOP. From the date hereof until the Closing Date, neither PPC nor Seller shall solicit or enter into negotiations with any party other than Purchasers or encourage, facilitate or initiate any discussions with any party other than Purchasers, with regard to a purchase and sale of any of the Subject Assets. (e) NOTICE OF BREACH OR NON-COMPLIANCE. PPC and Seller shall give prompt notice to Purchasers of (i) the occurrence or non-occurrence of any event which would cause or has caused any material breach of any representation or warranty of PPC or Seller contained in this Agreement at the Closing Date, and (ii) any failure of PPC or Seller to comply in any material respect with or satisfy any covenant or agreement to be complied with or performed by it hereunder. (f) PAYMENT OF INTER-COMPANY ACCOUNTS PAYABLE. Prior to the Closing, PPC and Seller shall cause Land Management Company to pay in full or otherwise be fully discharged from all inter-company accounts payable. XI. INDEMNIFICATION (a) BY PPC AND SELLER. PPC, Seller and their respective successors and assigns, jointly and severally, will protect, indemnify and hold harmless Purchasers and their affiliates, officers, directors, agents and employees in respect of any losses, claims, damages, liabilities or related expenses (including reasonable attorneys' fees) to which they may become subject as a result of (i) any inaccuracy in or breach of the representations and warranties made by PPC or 24 33 Seller in this Agreement, (ii) any failure by PPC or Seller to perform, abide by or fulfill agreements or covenants to be so performed, abided by or fulfilled by PPC or Seller hereunder, or (iii) any of the Excluded Liabilities. (b) BY PURCHASERS. Purchasers and their respective successors and assigns, jointly and severally, will protect, indemnify and hold harmless PPC, Seller, their affiliates, officers, directors, agents and employees in respect of any losses, claims, damages, liabilities, or related expenses (including reasonable attorneys' fees) to which they may be subject as a result of (i) any inaccuracy in or breach of the representations and warranties made by any of Purchasers in this Agreement, (ii) any failure by any of Purchasers to perform, abide by or fulfill agreements or covenants to be so performed, abided by or fulfilled by such Purchaser hereunder, or (iii) any Assumed Liability. (c) NOTICE OF CLAIM. Promptly following the receipt by a party hereunder of any claim, demand, action or suit or the incurrence of any loss, cost, damage or expense that is subject to the provisions of this Article XI ("Action"), such party shall give written notice of such Action to the other party hereto accompanied by copies of any written documentation with respect thereto received by the notifying party and stating the basis upon which indemnification is being sought pursuant to this Agreement. Such notice shall constitute a claim for indemnification hereunder (the "Claim"). (d) DEFENSE OF ACTIONS. Any party required to provide indemnification under this Article XI (the "Indemnifying Party") shall have the right at its option to compromise or defend at its own expense and with its own counsel, any such Action. Any party entitled to indemnification hereunder (the "Indemnified Party") shall have the right at its option to participate in the settlement or defense of any such action, with its own counsel and at its own expense, but the Indemnifying Party shall have the right to control such settlement or defense. The parties hereto agree to cooperate in any such defense or settlement and to give each other reasonable access to all information relevant thereto. The parties hereto shall similarly cooperate in the prosecution of any claim or lawsuit against any third party. If an Indemnifying Party fails to notify an Indemnified Party of its intent to take any action with respect to any Action within fifteen (15) days after receipt of a Claim, the Indemnified Party without waiving any rights to indemnification hereunder, may defend such Action and shall have the right to enter into any good faith settlement thereof without prior written consent of the Indemnifying Party. XII. CERTAIN POST-CLOSING COVENANTS (a) USE OF PHILLIPS NAME. Within sixty (60) days following the Closing, NACoal shall change the name of Land Management Company so that Phillips does not appear in said name. Purchasers shall cease using the names "Phillips," "Phillips Coal Land Management Company" or "Phillips Coal Company" for any purpose after the Closing; provided, however, that Purchasers shall have sixty (60) days after the Closing to complete such cessation of use. (b) CONFIDENTIALITY OF RECORDS. Within sixty (60) days following the Closing, Seller shall destroy or otherwise deliver to NACoal all copies of the Records described on SCHEDULES VI(a)(6) and all copies of the geological and geophysical databases owned by Land Management Company which are in the possession of, or under the control of, PPC, Seller or any of their 25 34 affiliated entities. Seller acknowledges that following the Closing the information and data set forth on such Records shall at all times be and remain the property of NACoal and the information on such geological and geophysical databases shall at all times be and remain the property of Land Management Company and that, except as to such information and data which Seller has been advised by counsel in a written opinion is required to be disclosed pursuant to applicable laws, Seller shall maintain such information and data in strict confidence. If Seller is so advised, it will notify NACoal prior to such disclosure, provide NACoal with a copy of the written opinion and consult and cooperate with NACoal regarding such disclosure. (c) ASSUMED LIABILITIES. At the Closing, NACoal shall assume, agree to pay, perform and discharge when due the following liabilities and obligations relating to the Subject Assets (the "Assumed Liabilities") or, in the case of any Subject Asset which has been conveyed and delivered to a directly or indirectly wholly owned corporate subsidiary, in accordance with Article III(d), or in the case of any Subject Asset which has been purchased and acquired by any one of the Purchasers other than NACoal, shall cause such entity to assume, agree to pay, perform and discharge when due such liabilities and obligations relating to such Subject Asset: (i) JOINT VENTURE CONTRACTS. All liabilities and obligations of Seller from and after the Closing arising out of the Contracts set forth on SCHEDULE IV(b)(i). (ii) COAL LEASES. All liabilities and obligations of Seller from and after the Closing arising out of the Coal Leases listed in SCHEDULE VI(a)(4)(i). (iii) FEE PROPERTIES AND MISCELLANEOUS ASSETS. All liabilities and obligations arising out of or resulting from the use or ownership from and after the Closing of the Fee Properties listed in SCHEDULE VI(a)(4)(ii) and the Records and Fixtures and Personal Property listed in SCHEDULE VI(a)(6). (iv) NON-OPERATING INTERESTS. All liabilities and obligations of Seller from and after the Closing arising out of the Non-Operating Interests listed in SCHEDULE VI(a)(4)(iii). (v) NORIT AGREEMENTS. All liabilities and obligations of Seller from and after the Closing arising out of the Contracts set forth on SCHEDULE VI(a)(4)(iv). (vi) POWER PROJECT INTEREST CONTRACTS. All liabilities and obligations of Seller from and after the Closing arising out of the Contracts set forth on SCHEDULE IV(e)(i). (vii) CONTRACTS INCLUDED IN MISCELLANEOUS ASSETS. All liabilities and obligations of Seller from and after the Closing arising out of the leases of Fixtures and Personal Property listed on SCHEDULE VI(a)(6). Notwithstanding the foregoing, no Purchaser is assuming or agreeing to pay, perform or discharge any liability or obligation that is an Excluded Liability or any other liability or obligation of Seller or PPC. (d) REAL PROPERTY ADMINISTRATION. Notwithstanding Article XII(c), Seller, as a service to Purchasers, shall continue to make in a timely manner all payments which are due in the ordinary course of business under the terms of the Coal Leases and the coal leases and subleases 26 35 held by the Joint Ventures within ninety (90) calendar days after the Closing Date. Purchasers shall reimburse Seller for all payments so made by Seller and due between the close of business on August 31, 2000, and the end of such 90-day period, upon presentation by Seller of proper evidence of such payments. Seller and Purchasers shall consult with each other monthly or as frequently as necessary after the close of business on August 31, 2000, concerning the payments required under the terms of such Coal Leases and such other coal leases and subleases until such time as Purchasers have established their records so that they can efficiently and properly make such payments. Seller shall provide such service at no additional cost or expense to Purchasers for a period of sixty (60) days following the Closing Date, after which Purchasers shall reimburse Seller for Seller's actual out-of-pocket costs and expenses to provide such services. (e) RED RIVER SERVICES AGREEMENT. Notwithstanding Article XII(c), Seller agrees to terminate, and Seller and NACoal agree to cause Red River Mining Company to terminate, that certain Services Agreement, dated as of September 1, 1988, by and between Seller and Red River Mining Company, which is listed on SCHEDULE IV(b)(i), effective as of the Closing Date. (f) POST-CLOSING EXPENSE REIMBURSEMENT. Purchasers shall reimburse Seller, within sixty (60) days following the Closing and upon presentation by Seller of proper evidence of payment, for all out-of-pocket expenses paid by Seller for the period between the close of business on August 31, 2000, and the Closing Date arising in the ordinary course of business out of its ownership of the Red River Interest and the Mississippi Lignite Interest. Seller shall reimburse Purchasers, within sixty (60) days following the Closing and upon presentation by Purchasers of proper evidence of payment, one-half of all out-of-pocket expenses paid by Purchasers to obtain the replacement arrangements required by Article VIII(c) of this Agreement. (g) LICENSE TO OFFICE SPACE. Seller shall be permitted to use office space in the premises covered by the Sublease for a period of ninety (90) days following the Closing on a rent-free basis in order to enable Seller to perform its obligations under Article XII(d) and other similar real property administration activities. XIII. TAX MATTERS (a) SECTION 338(h)(10) ELECTION. NACoal or an appropriate affiliate of NACoal, on the one hand, and Seller or an appropriate affiliate of Seller, on the other hand, shall join with each other in making the election provided by Section 338(h)(10) of the Code, in accordance with Temporary Treasury Regulation Section 1.338(h)(10)-1T(c)(2), with respect to the acquisition of the shares of Land Management Company by NACoal and, if permissible, similar elections under any applicable state or local income tax laws. The Section 338(h)(10) election shall be made on Form 8023, which shall be prepared by NACoal and delivered by NACoal to Seller as promptly as practicable, but no later than 180 days after the Closing Date. A copy of the final version of such Form 8023, after having been endorsed by Seller, shall be provided to NACoal by Seller no later than 30 days after the date on which NACoal shall have delivered such completed Form 8023 to Seller. NACoal shall timely file such Form 8023 with the Internal Revenue Service in accordance with Temporary Treasury Regulation Section 338(h)(10)-1T(c)(2), and NACoal shall attach (or shall cause Land Management Company to attach) a copy of such Form 8023 to the consolidated U.S. corporation income tax return that an affiliate of 27 36 NACoal will file for its taxable year which includes the Closing Date. PPC shall attach a copy of such Form 8023 to the consolidated U.S. corporation income tax return that PPC will file for its taxable year which includes the Closing Date. PPC and Seller shall be responsible for any Taxes that are due as a result of the Section 338(h)(10) election provided for in this Article XIII(a) with respect to the purchase of the Shares of Land Management Company by NACoal. (b) SECTION 338(h)(10) ALLOCATION. As soon as practicable, but in any event prior to the Closing, NACoal and Seller shall agree on the allocation, in accordance with the rules prescribed in Temporary Treasury Regulation Section 1.338-6T, of the aggregate deemed sales price at which Land Management Company will be deemed, as a result of the Section 338(h)(10) election provided for in Article XIII(a), to have sold on the Closing Date all of the Land Management Assets. Such allocation shall be set forth on SCHEDULE XIII(b), which NACoal and Seller shall prepare and append to this Agreement at or before the Closing. Each of Seller and NACoal and their respective affiliates shall (and NACoal shall cause Land Management Company after the Closing to) adhere to, and be bound by, such allocation for U.S. federal income tax purposes, and to the extent such Section 338(h)(10) election is recognized by any state or local Tax Authority for state or local income tax purposes, for all such state or local income tax purposes. (c) TAX PRICE ALLOCATION. The Tax Price (as hereinafter defined) shall be allocated among the Subject Assets, including, without limitation the Red River Interest, Mississippi Lignite Interest, the Shares, the Coal Leases, the Fee Properties, the Non-Operating Interests, the Eight Mile Venture Interest and the other assets referred to in Articles VI(a)(5) and VI(a)(6) of this Agreement, in the manner set forth on SCHEDULE XIII(c), which schedule NACoal, on behalf of Purchasers, and Seller shall prepare and append to this Agreement at or before the Closing. The term "Tax Price" shall mean the total of (i) the Sale Price set forth in Article II of this Agreement, and (ii) the aggregate amount of the monetary liabilities and obligations of Seller (if any) assumed by Purchasers in connection with the transactions contemplated in this Agreement. Each of Seller and Purchasers and their respective affiliates shall adhere to, and be bound by, such allocation of the Tax Price. Each of Seller and Purchasers shall timely file, or shall cause one of their respective affiliates timely to file, asset acquisition statements on Form 8594 with its U.S. corporation income tax return for the taxable year that includes the Closing Date, in accordance with Temporary Treasury Regulation Section 1.1060-1T(e). (d) POST-CLOSING TAX MATTERS. NACoal shall prepare and file, or cause to be prepared and filed, all Tax Returns due after the Closing Date for Red River Mining Company, Mississippi Lignite Mining Company, Land Management Company or the Eight Mile Venture for (i) any taxable year which ends on or before the Closing Date (other than the U.S. corporation income tax return of Land Management Company for its taxable year which ends on the Closing Date, which Seller or one of its affiliates shall prepare and file), and (ii) any taxable year which begins before and ends after the Closing Date. With respect to any Taxes payable by Red River Mining Company, Mississippi Lignite Mining Company, Land Management Company or the Eight Mile Venture with respect to any of such Tax Returns which NACoal is responsible for preparing, prior to the date on which such Tax is required to be paid Seller shall remit to NACoal an amount equal to the portion of such Tax which is attributable to the period of time during such taxable year that Seller had an ownership interest in Red River Mining Company, Mississippi Lignite Mining Company, Land Management Company or the Eight Mile 28 37 Venture, as the case may be, and which is based on the ownership interest that Seller had in such person during such taxable year (or portion thereof). In the case of a taxable year of Red River Mining Company, Mississippi Lignite Mining Company, Land Management Company or the Eight Mile Venture which begins before and ends after the Closing Date, the portion of such Tax which is attributable to the period of time during such taxable year in which Seller had an ownership interest in such person shall be determined on the basis of a closing of the books of such person as of the Closing Date. XIV. PUBLIC ANNOUNCEMENTS No party hereto shall make any press release or other public announcements, concerning this transaction, without the prior written approval of the other parties, hereto and agreement to the form of the announcement, except as may be required by applicable laws or rules and regulation of any governmental agency or stock exchange. XV. SUBSEQUENT POWER PROJECT INTEREST (a) DISPOSITION OF POWER PROJECT INTEREST. If and when the buyer under that certain Lignite Sales Agreement between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of April 1, 1998, as amended, completes construction of a second electric power generation facility in Choctaw County, Mississippi and for which such buyer would purchase lignite from NACoal or one of its affiliates (including Mississippi Lignite Mining Company) and supplied from the Red Hills Mine (or an expansion thereof or another mine developed and constructed in connection therewith), either under such Agreement or under other lignite sales agreements, to satisfy substantially all of the fuel requirements for such second facility, then if thereafter NACoal disposes of the Power Project Interest by sale in an arms length transaction with an unaffiliated third party, upon consummation of such disposition Seller shall be entitled to receive from NACoal, and NACoal shall pay to Seller, seventy-five percent (75%) of the then cash value of the total proceeds received by NACoal pursuant to the agreement for the disposition of such Interest. (b) PAYMENT DUE SELLER UPON COMMERCIAL OPERATION OF SECOND ELECTRIC POWER GENERATION FACILITY. In addition to the payment described in Article XV(a) above, if and when the buyer under the Lignite Sales Agreement referred to in Article XV(a) above begins selling electric power from the second electric power generation facility referred to in Article XV(a) above, and the fuel requirements to such facility are being substantially satisfied by purchases of lignite from NACoal or one of its affiliates (including Mississippi Lignite Mining Company) and supplied from the Red Hills Mine (or an expansion thereof or another mine developed and constructed in connection therewith), either under the Lignite Sales Agreement referred to in Article XV(a) or under other lignite sales agreements, NACoal shall pay to Seller the sum of Ten Million Dollars ($10,000,000) within sixty (60) days of the actual commercial operation date of such second generation facility. XVI. TERMINATION. (a) BY PURCHASERS. This Agreement may be terminated prior to the Closing at the option of Purchasers by delivery of written notice to PPC and Seller (i) if any of the conditions 29 38 set forth in Article IX(a) shall not have been fulfilled at or prior to the Closing; (ii) if the Closing shall not have occurred by December 1, 2000; or (iii) in accordance with Article XVI(d). (b) BY PPC AND SELLER. This Agreement may be terminated prior to the Closing at the option of PPC and Seller by delivery of written notice to Purchasers (i) if any of the conditions set forth in Article IX(b) shall not have been fulfilled at or prior to the Closing; or (ii) if the Closing shall not have occurred by December 1, 2000. (c) BY MUTUAL AGREEMENT; NO WAIVER. This Agreement may also be terminated prior to the Closing by an instrument in writing duly executed by the parties hereto, or as otherwise expressly provided herein. A party's exercise of its rights of termination under Article XVI(a), Article XVI(b) or Article XVI(d) shall not constitute a waiver of its rights to recover damages, whether pursuant to breach of contract or in tort, from the other party as a result of the non-fulfillment of any condition in Article IX(a), (b) or (d), as the case may be. (d) DUE DILIGENCE TERMINATION. The parties acknowledge that this Agreement is being executed and delivered prior to the completion of Purchasers' due diligence investigation of the Subject Assets. Consequently, in addition to the termination rights set forth in Article XVI(a), Purchasers shall have the right to terminate this Agreement if, prior to the Closing, Purchasers shall discover or become aware, as a result of its due diligence investigation of the Subject Assets or otherwise, of any material adverse change since December 31, 1999 in or affecting the Subject Assets. XVII. MISCELLANEOUS (a) SUCCESSORS AND ASSIGNS. All of the terms, covenants and conditions of this Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, successors and assigns. (b) NO THIRD PARTY BENEFICIARIES. This Agreement is for the benefit of PPC, Seller and Purchasers only and not for the benefit of any other parties. (c) ASSIGNMENT. Neither PPC, Seller, nor Purchasers may assign any rights or delegate any duties established pursuant to this Agreement without the prior written consent of the other party; provided that NACoal shall have the right to assign its rights hereunder to any corporate subsidiary in which 100% of the capital stock of such subsidiary is directly or indirectly owned by NACoal or to any Joint Venture which will be directly or indirectly owned by NACoal following the Closing. (d) NOTICES. All notices, consents, requests, instructions, approvals and other communications provided for herein shall be deemed to be validly given, made or served, if in writing and delivered personally or sent by courier service, telefax, telex, or certified mail to the address listed below: 30 39 If to PPC or Seller: If to Purchasers: Phillips Petroleum Company The North American Coal Corporation 1530 POB Signature Place II Bartlesville, Oklahoma 74004 14785 Preston Road, Suite 1100 Attention: Mr. David S. Smith Dallas, Texas 75240-7891 Phone: (918) 661-1571 Attention: Mr. Clifford R. Miercort Telefax: (918) 661-3049 Phone: (972) 448-5400 Telefax: (972) 387-1031 (e) COUNTERPARTS. This Agreement may be executed concurrently in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) SEVERABILITY. If any term or provision of this Agreement is held to be invalid or unenforceable, then the parties intend and agree that the remaining portion of such term or provision shall remain in force and effect, modified to the minimum extent required to comply with applicable law or enforceability. (g) SURVIVAL. The liability and obligations of PPC, Seller and Purchasers under each of their respective representations and covenants, including all indemnities, releases, and assumption of obligations contained in this Agreement shall survive Closing and execution and delivery of the assignments referenced herein and remain in force and effect. (h) ENTIRE AGREEMENT. This Agreement and the schedules and exhibits attached hereto constitute the entire agreement by and among PPC, Seller and Purchasers with respect to the transactions contemplated herein, and supersede all prior oral or written agreements, commitments, understandings, or information otherwise furnished by PPC or Seller to Purchasers with respect to such matters. (i) EXPENSES. Each party shall pay its own attorneys fees, broker or finders fees, fees of investment advisors and other expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement, including all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees assessed upon any such party in connection with the transactions contemplated by this Agreement, and shall defend, indemnify and hold harmless the other parties from all claims, demands, losses, liabilities and causes of action related thereto. (j) APPLICABLE LAW. This Agreement shall be governed by and interpreted in accordance with the Laws of the State of Texas, without giving effect to any principles of conflicts of law. All assignments and instruments of conveyance executed in accordance with this Agreement shall be governed by interpreted and enforced in accordance with the Laws of the state where the Subject Assets conveyed thereby are located. (k) HEADINGS. The article, paragraph and other headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 31 40 (l) WAIVER AND AMENDMENT. Any of the terms or conditions of this Agreement may be waived in writing at any time by the parties which are entitled to the benefits thereof. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of such provisions at any time in the future or a waiver of any other provision hereof. No amendment of this Agreement shall be binding unless in writing and signed by representatives of all parties. Purchasers hereby authorize NACoal to execute and deliver any and all amendments and waivers on their behalf, and all such waivers and amendments so executed and delivered shall be binding on each of Purchasers and enforceable against each of Purchasers. IN WITNESS WHEREOF, PPC, Seller, and Purchasers, acting through their authorized representatives, do hereby execute and deliver this Agreement the date first written above. SELLER: PHILLIPS COAL COMPANY By: /s/ Paul M. Thompson ----------------------------------------- Title: President -------------------------------------- PPC: PHILLIPS PETROLEUM COMPANY By: /s/ Allyn W. Risley ----------------------------------------- Title: Vice President -------------------------------------- PURCHASERS: THE NORTH AMERICAN COAL CORPORATION By: /s/ Clifford R. Miercort ----------------------------------------- Title: President and Chief Executive Officer -------------------------------------- OXBOW PROPERTY COMPANY L.L.C. By: /s/ Thomas A. Koza ----------------------------------------- Title: Manager -------------------------------------- RED HILLS PROPERTY COMPANY L.L.C. By: /s/ Herschell A. Cashion ----------------------------------------- Title: Manager -------------------------------------- 32 EX-10.XLIV 6 l87125bex10-xliv.txt EXHIBIT 10(XLIV) 1 Exhibit 10(xliv) AMENDMENT NO. 1 TO THE NORTH AMERICAN COAL CORPORATION DEFERRED COMPENSATION PLAN FOR MANAGEMENT EMPLOYEES (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999) --------------------------------------------------- The North American Coal Corporation hereby adopts this Amendment No. 2 to The North American Coal Corporation Deferred Compensation Plan for Management Employees (As Amended and Restated Effective January 1, 1999) (the "Plan"), to be effective as of the date on which the Amendment is executed. Words 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 3.4(e) of the Plan is hereby amended in its entirety to read as follows: "Debits for any distributions made from the Sub-Accounts and for any amounts forfeited under Section 6.1(e)." SECTION 2 --------- Section 6.1of the Plan is is hereby amended by adding new Subsections (e) and (f) to the end thereof, to read as follows: "(e) Withdrawals Subject to a 10% Penalty. (i) The provisions of this Subsection shall apply notwithstanding any other provision of the Plan to the contrary. (ii) A Participant who is an Employee may, at any time (and from time to time) elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Additional Excess 401(k) Sub-Account; (B) the Additional Excess Matching Sub-Account; and (C) the VAP Deferral Sub-Account. (iii) In addition to the amounts described in (ii) above, Participants who have ceased to be Employees of the Controlled Group may also elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Basic Excess 401(k) Sub-Account; and (B) the Basic Excess Matching Sub-Account. (iv) Withdrawals under this Subsection shall be equal to the entire amount credited to any such Sub-Account, less 10%. Such 10% reduction shall be treated as a forfeiture hereunder and shall immediately be subtracted from the applicable Sub-Account, never to be restored. 2 (f) Payment Restriction. Notwithstanding any provision of the Plan to the contrary, the payment of all or any portion of the amounts payable hereunder will be deferred to the extent that any amount payable, when added to any other compensation received or to be received by the Participant in the same calendar year, would not be deductible by the Employer by reason of section 162(m) of the Code. The amount to be deferred will equal the amount that otherwise would not be deductible by the Employer by reason of Section 162(m) of the Code, but in no event greater than the total amount otherwise payable hereunder. The deferred amount shall become payable on December 31 of the first succeeding calendar year in which such amount, when added to all other compensation received or to be received by the Participant in such calendar year, would not be non-deductible by the Employer by reason of section 162(m) of the Code. The Nominating, Organization and Compensation Committee of the Board of Directors, in its sole and absolute discretion, shall have the authority to waive this payment restriction (in whole or in part) upon the written request of the participant." EXECUTED this 23rd day of June, 2000. ---- ---- THE NORTH AMERICAN COAL CORPORATION By: /s/ Charles A. Bittenbender ----------------------------------- Title: Assistant Secretary 2 EX-10.XLV 7 l87125bex10-xlv.txt EXHIBIT 10(XLV) 1 Exhibit 10 (xlv) THE NORTH AMERICAN COAL CORPORATION 2001 INCENTIVE COMPENSATION PLAN 2 2001 INCENTIVE COMPENSATION PLAN SUMMARY The Incentive Compensation Plan (Plan) offers a highly attractive incentive compensation opportunity to senior managers when all performance objectives under their control or influence are achieved. This is accomplished through a structure containing the following elements: - Each participant is assigned an individual incentive target, stated as a percentage of their salary midpoint, that establishes the incentive compensation amount they will receive when performance objectives are met. - The individual target amount is allocated among the following performace components: - North American Coal (NAC) corporate performance. - Bellaire Corporation cash flow. - Business unit results. - Individual achievement. - Percentage weightings are assigned to each component, based on the participant's accountabilities and their impact on each component. - One or more performance objectives will be established at the beginning of the year for each performance component. - A performance range, which defines the acceptable level of results, from threshold to maximum, is created for each performance objective. - A payout range is defined, which provides for incentive payments of up to 150 percent of the incentive target, except to the extent the Committee elects to increase the actual pool by up to 10 percent, as described below. - A performance/payout schedule combines the two ranges into a matrix that defines the level of incentive compensation payment that will result from each level of performance. - After audited financials are available, awards will be calculated based on actual results against the established objectives. - A final individual performance adjustment may be made, within a range of +10 percent of the calculated award, based on a judgment of the participant's overall performance. This Incentive Compensation Plan will allow management and the Board to establish, in advance, the performance expectations and related incentive compensation potential that NAC's executives can expect for the year. At year-end, the Plan focuses judgment of the management team's performance on predetermined objectives that should produce fairness in the determination of rewards. 3 2001 INCENTIVE COMPENSATION PLAN page 2 PLAN STRUCTURE INDIVIDUAL INCENTIVE TARGETS ---------------------------- The primary focus of the proposed Plan is the individual incentive compensation target. Each participant is assigned a target, stated as a percentage of the mid-point of base salary, which will be paid when all relevant performance objectives are achieved. The Plan provides for payments above or below the target to reflect acceptable variances from performance objectives. PERFORMANCE GOALS ----------------- Four sets of goals are proposed: INTENTIONALLY LEFT BLANK INCENTIVE AWARD RANGE --------------------- Actual performance results attained probably will not match the established performance goals exactly. Therefore, the Plan is designed to provide incentive compensation payouts of up to 150 percent of the target award if actual results fall within a predetermined range of acceptable performance. The award range is defined as follows: % OF AWARD LEVEL TARGET DESCRIPTION ------------------- ----------- --------------------------------- Maximum 150% Highest level of incentive paid. Target 100% Competitive incentive opportunity for achieving all-important goals. Threshold 50% Incentive paid when results meet minimum acceptable standards. Below threshold 0% Performance does not merit incentive payment. 4 2001 INCENTIVE COMPENSATION PLAN page 3 COMPONENT WEIGHTINGS -------------------- Participants' potential incentive awards will be allocated between performance components based on their individual impact on results. The allocations allow for awards to be earned based on the achievement of the performance objectives over which each executive has the most control. Weightings will be stated as a percentage and total 100 percent for each participant. The weightings will be established each year to reflect current organizational accountabilities and the relative importance of the various performance components. Our recommended weightings are as follows: INTENTIONALLY LEFT BLANK When there is more than one goal for a performance component, further percentage weightings may be assigned, within the overall weightings, to reflect the relative priority of each goal. For example, if the individual component has a 40 percent weighting and there are five individual goals, each individual goal might be assigned a priority weighting of 20 percent. PERFORMANCE RANGE ----------------- A range of performance acceptable for incentive compensation payment will be established for each performance objective. For quantitative goals, the range may be set as a percentage of the objective. For goals that cannot be quantified, the range will be defined in narrative form. The following general definitions will apply. The percentage ranges indicated are only guidelines; specific percentage ranges or narrative descriptions should be determined for each goal based on the definitions. 5 2001 INCENTIVE COMPENSATION PLAN page 4
PERFORMANCE PERFORMANCE PERCENTAGE LEVEL GUIDELINE DEFINITION ------------------------ ------------------- ---------------------------------------------- Threshold 75% Minimum acceptable results justifying payment of incentives. Objective 100% Results meet high performance demands justifying fully competitive rewards. Maximum 125% Highest foreseeable level of performance.
PERFORMANCE/PAYOUT SCHEDULE Combining the performance and payout ranges yields a performance/ payout schedule as in the following example:
PERFORMANCE DEFINITION RESULTS AWARD LEVELS PAYOUT -------------------- ---------------------------- ----------- -------------------- ----------- Threshold Minimum 75% Threshold 50% Objective On plan 100% Target 100% Maximum Exceeding expectations 125% Maximum 150%
This schedule is applied separately to the results of each established performance element to determine the incentive amount earned in accordance with assigned weightings. Performance that falls between the defined levels would result in proportionally adjusted payouts, which may be calculated mathematically or determined judgmentally. CORPORATE PERFORMANCE THRESHOLD No incentive compensation awards will be earned under the Plan in any year unless the threshold level of the corporate performance component is achieved. Once the corporate performance threshold is attained, each performance objective is separate and distinct. This means that partial awards can be earned for the attainment of one performance objective even if another is not sufficient to generate a payout. INDIVIDUAL ADJUSTMENT FACTOR Each individual award, as calculated above, may be adjusted upward or downward by as much as 10 percent of the total award, based on management's' perceptions of each individual's overall performance. PARTIAL AWARDS 6 2001 INCENTIVE COMPENSATION PLAN page 5 Executives who are hired or promoted during the year to positions eligible for participation in the Plan may be included in the Plan on a prorata basis. COMMITTEE DISCRETION It is the intent of the Plan that the total incentive compensation, as determined above, will be the final total corporate incentive compensation to be paid. However, the Committee, in its sole discretion, may increase or decrease, by up to 10 percent, the total incentive compensation or may approve an incentive compensation payment where normally there would be no payment, due to corporate performance which is below the criteria established for the year. 2001 PERFORMANCE TARGETS See Plan Summary. EX-10.LIII 8 l87125bex10-liii.txt EXHIBIT 10(LIII) 1 Exhibit 10 (liii) THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN FOR YEARS 2000 TO 2009 1. PURPOSE OF THE PLAN ------------------- The purpose of this Value Appreciation Plan ("VAP" or the "Plan") is to further the long-term profits and growth of The North American Coal Corporation (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. 2. DEFINITIONS ----------- (a) "Award" means an award of a VAP Amount under the provisions of the Plan. (b) "Committee" shall mean the Nominating, Organization and Compensation Committee of the Company's Board of Directors appointed to administer the Plan in accordance with Section 3. (c) "Current Projects" shall mean the Company's existing projects, such as Coteau, Falkirk, Sabine, Red River Mining, Mississippi Lignite Mining, San Miguel, Florida Dragline Operations, and interest income from notes receivable. 2 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN (d) "New Projects" shall mean any new mining activities or projects, such as the Dos Republicas Project, the Jayamkondam Project (India), Guney Ege Enerji Project (Turkey), expansions at current operations, and other new projects and activities. (e) "Plan Term" shall mean the ten (10) year period from January 1, 2000 through December 31, 2009. (f) "Salary Grade" shall mean the salary grade assigned to a Plan Participant by the Company. (g) "Subsidiary" shall mean any corporation, partnership or other entity the majority of the outstanding voting securities of which is owned, directly or indirectly, by the Company. (h) "Value Appreciation" shall mean an amount equal to after-tax net income less a capital charge which is ten percent (10%) of the book value of the entity. (i) "VAP Amount" shall mean a Plan Participant's VAP Target Amount times a VAP Multiplier, as determined in accordance with Section 8. (j) "VAP Goals for Current Projects" shall mean the expected Value Appreciation for the Company and its Subsidiaries over the Plan Term as determined by the Committee. -2- 3 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN (k) "VAP Goal for New Projects" shall be the cumulative amount of Value Appreciation to be obtained over the Plan Term from New Projects, as determined by the Committee. (l) "VAP Multiplier" shall mean a factor based on VAP Ratio as further described herein. (m) "VAP Percentage" shall mean a percentage of the Plan Participant's salary range midpoint, and shall be determined for each Plan Participant by the Committee. (n) "VAP Ratio" shall mean a factor determined based on actual performance versus VAP Goals as further described herein. (o) "VAP Target Amount" shall mean (i) a dollar amount equal to the VAP Percentage for a Plan Participant's Salary Grade times the Plan Participant's salary range midpoint or (ii) such amount as otherwise determined by the Committee. (p) "VAP Targets for New Projects" shall mean those targets calculated based on the expected capital investment and income projections that are used, in good faith as realistic best estimates, to obtain Management approval of the New Project. -3- 4 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN FOR 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 acquired after adoption of this Plan) generally at a Salary Grade no lower than 16, 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 Subsidiary may receive an Award under this Plan. Directors of the Company or any Subsidiary who are not employees of the Company or any Subsidiary are not eligible to participate in this Plan. Any person receiving an Award shall be referred to as a "Participant." 5. VAP AMOUNTS ----------- 5.1 AWARDS. As to each Award under this Plan, the Committee shall determine and approve (a) the VAP Target Amount that may be awarded for each Salary Grade, (b) the employees to whom VAP Amounts are to be awarded and (c) the VAP Amount to be awarded to each individual employee. All Awards under this Plan shall be effective as of January 1 of the year determined by the Committee. Each -4- 5 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN Award shall vest and the amount represented thereby shall be payable upon the terms and conditions set forth in Section 5.2. 5.2 VESTING; PAYMENT OF VAP AMOUNTS. (a) Each Participant's interest in his VAP Account under this Plan shall vest at the rate of 20 percent for each year following the effective date of the Participant's initial Award under this Plan during which the Participant remains in the continuous employ of the Company or a Subsidiary; provided, however, a Participant's interest in his VAP Account shall vest 100 percent in the event (x) of such Participant's death or permanent disability, (y) such Participant remains in the continuous employ of the Company or a Subsidiary through December 31, 2009, or (z) of such Participant's retirement from his employment with the Company or Subsidiary. All payments under this Plan shall be approved by the Committee. Subject to the provisions of Section 5.2(f), the vested amounts in a Participant's VAP Account, including any Award for the year 2009, shall be payable as soon as practicable following approval thereof by the Committee following the earlier to occur of: (i) December 31, 2009, (ii) the date of a Participant's termination of employment for death, permanent disability or retirement, (iii) the date of a Participant's termination of employment other than for death, disability or retirement, upon a determination by the Chief Executive Officer of the Company and the Committee that extraordinary circumstances exist which warrant such payment, or (iv) the termination of this Plan pursuant to Section 9. -5- 6 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN Notwithstanding the foregoing, the Committee may vest a Participant whose employment otherwise terminates in such amounts, up to 100 percent of his VAP Account, as the Committee may in its sole discretion determine. (b) In the event that all or any portion of a Participant's VAP Account does not vest pursuant to Section 5.2(a), the VAP Amount represented thereby shall terminate and be forfeited. (c) As soon as practicable following Committee approval following the payment dates specified in Sections 5.2(a) (i), (ii), (iii) and (iv), the Company shall deliver to the Participant or, if applicable, his heirs or designated beneficiaries, a check in full payment of the amount represented by the Participant's vested interest in his VAP Account. (d) The amounts payable under this Plan shall be calculated as of a valuation date determined by the Committee, and in the absence of such determination, shall be calculated based on the value of the VAP Account as of the December 31 coincident with or immediately preceding the date of payment. (e) There shall be deducted from each payment the amount of any tax required by any governmental authority to be withheld and paid by the Company or Subsidiary to such governmental authority for the account of the person entitled to such payment. (f) At any time a Participant may request in writing that the Committee permit the Participant to exercise and receive payment of an amount up to his then -6- 7 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN vested interest in his VAP Account if such funds are needed because of a financial hardship or unforeseen financial emergency; provided, however, that the amount withdrawn may not be more than the lesser of the amount necessary to satisfy the hardship or financial emergency or 40 percent of the total VAP Account. 5.3 FORFEITURE OF VAP AMOUNTS. Notwithstanding anything to the contrary contained in this Plan, in the event a Participant 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 Award shall be deemed to have terminated at the time of such act and his interest in his VAP Account shall immediately be terminated and forfeited. 6. ASSIGNABILITY ------------- No Award 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. VAP ACCOUNTS ------------ The Company shall maintain an account ("VAP Account") on its books and records in the name of each Participant to reflect the Participant's interest under this Plan. The VAP Account of each Participant shall be adjusted in accordance with the provisions of Section 8 hereof. Each Participant's VAP Account also shall be credited with earnings as determined in accordance with provisions of this Section 7 and shall be debited for any distributions made to the Participant from his VAP Account. -7- 8 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN As of the end of each calendar year, each Participant's VAP Account shall be credited with an amount determined by multiplying the Participant's average VAP Account balance during such year by the average monthly rate during such year for 10-year U.S. Treasury Bonds. The Treasurer of the Company shall keep an accurate record of the amounts credited or debited to each Participant's VAP Account and, as of December 31 of each year, shall deliver to each Participant a written statement showing the credits and debits made during the year to this VAP Account and the accumulated balance thereof. 8. CALCULATION OF VALUE APPRECIATION; ---------------------------------- ADJUSTMENTS OF VAP AMOUNTS -------------------------- Value Appreciation and all VAP Amounts to be credited to a Participant's VAP Account under this Plan shall be determined based on the actual performance of Current Projects and on the acquisition and actual performance of New Projects as hereinafter described. Following the acquisition of New Projects, the VAP Targets for New Projects shall be included in the VAP Goals for Current and New Projects. (a) Annual Value Appreciation of Current and New Projects As of December 31 of each year, the amount to be credited to a Participant's VAP Account based on the annual Value Appreciation of all Current and New Projects shall be determined as follows: VAP AMOUNT FOR ANNUAL VALUE APPRECIATION OF ALL CURRENT AND NEW PROJECTS = VAP MULTIPLIER X 30% X VAP TARGET AMOUNT where -8- 9 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN VAP MULTIPLIER = 4 X VAP RATIO - 3 where VAP RATIO = TOTAL ACTUAL ANNUAL VALUE APPRECIATION OF ALL CURRENT AND NEW PROJECTS ---------------------------------------------------------------------- TOTAL ANNUAL VAP GOAL OF ALL CURRENT PROJECTS (INCLUDING VAP TARGETS FOR NEW PROJECTS)
However, if the VAP Multiplier calculated above is less than 0, it shall be 0, and if greater than 2.00, it shall be 2.00. See Exhibit 1 hereto. (b) Cumulative Value Appreciation of Current and New Projects As of December 31 of each year, the amount to be credited to a Participant's VAP Account based on the cumulative Value Appreciation of all Current and New Projects from the beginning of the Plan Term (or from the beginning of a Participant's participation in this Plan, in the case of a Participant whose initial Award is effective after January 1, 2000) shall be determined as follows: VAP AMOUNT FOR CUMULATIVE VALUE APPRECIATION OF ALL CURRENT AND NEW PROJECTS = VAP MULTIPLIER X 30% X VAP TARGET AMOUNT
where VAP MULTIPLIER = 4 X VAP RATIO - 3 where
VAP RATIO = ACTUAL CUMULATIVE VALUE APPRECIATION OF ALL CURRENT AND NEW PROJECTS CUMULATIVE VAP GOAL OF ALL CURRENT PROJECTS (INCLUDING VAP TARGETS FOR NEW PROJECTS)
However, if the VAP Multiplier calculated above is less than 0, it shall be 0, and if greater than 2.00, it shall be 2.00. See Exhibit 1 hereto. (c) VAP Amounts for the Acquisition of New Projects -9- 10 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN The acquisition of a New Project for purposes of this Plan shall be determined by the Committee. The amount to be credited to a Participant's VAP Account for the Acquisition of a New Project shall be determined as follows: VAP AMOUNT FOR THE ACQUISITION OF NEW PROJECTS = VAP MULTIPLIER X 40% X VAP TARGET AMOUNT X 10 where VAP MULTIPLIER = A - B where A = THE PRESENT VALUE OF THE EXPECTED CUMULATIVE VALUE APPRECIATION OF ALL NEW PROJECTS FOR THE ACTUAL EXPECTED TERM(S) OF THE NEW PROJECT(S) BASED ON A DISCOUNT FACTOR OF 10%, AND B = THE TOTAL VAP GOAL FOR NEW PROJECTS OVER THE PLAN TERM AS DETERMINED BY THE COMMITTEE. The expected cumulative Value Appreciation for each New Project shall be reviewed from time to time and the VAP Amount for the Acquisition of the New Projects shall be adjusted, as appropriate. Any earnings on such VAP Amount during the period between reviews shall not be adjusted. (d) Total VAP Amount for Current and New Projects The total VAP Amount to be credited to each Participant's VAP Account shall be determined as of December 31 of each year by adding the VAP amounts for Current and New Projects (as determined under Section 8(a) and 8(b)) to the VAP Amounts for the Acquisition of New Projects (as determined under Section 8(c)). (e) Committee Discretion Notwithstanding the provisions of this Plan, the Committee, in its sole discretion, may make equitable adjustments by increasing or decreasing the VAP -10- 11 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN Amount to be credited to a Participant's VAP Account or may approve an Award where one otherwise would not be made. 9. AMENDMENT AND TERMINATION ------------------------- The Committee or Board of Directors of the Company 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 Participant, affect the Participant's rights in an outstanding Award under this Plan; and further provided, however, that upon a termination of this Plan, all outstanding Awards shall vest 100 percent immediately thereupon, and shall be paid in accordance with Section 5.2. 10. GENERAL PROVISIONS ------------------ Neither the adoption or operation of this Plan, nor any document describing or referring to the Plan, or any part thereof, shall confer upon any employee any right to continue in the employ 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 provisions of the Plan shall be governed by and construed in accordance with the laws of the State of Texas. No trust has been created by the Company or any Subsidiary for the payment of VAP Amounts granted under this Plan; nor have the Participants been granted any lien on any assets of the Company or any Subsidiary to secure payment of such benefits. -11- 12 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN This Plan represents only an unfunded, unsecured promise to pay by the Company, and the Participants 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 with its meaning the plural, and vise versa. 11. EFFECTIVE DATE -------------- The effective date of this Plan is as of January 1, 2000. -12- 13 THE NORTH AMERICAN COAL CORPORATION VALUE APPRECIATION PLAN EXHIBIT 1 TO THE NORTH ANERICAN COAL CORPORATION VALUE APPRECIATION PLAN ----------------------- VAP RATIO VAP MULTIPLIER --------- -------------- INTENTIONALLY OMITTED -13- EX-10.LIV 9 l87125bex10-liv.txt EXHIBIT 10(LIV) 1 EXHIBIT 10(liv) U.S. $175,000,000 CREDIT AGREEMENT Dated as of October 11, 2000 Among THE NORTH AMERICAN COAL CORPORATION AS BORROWER and THE INITIAL LENDERS NAMED HEREIN AS INITIAL LENDERS and SALOMON SMITH BARNEY INC. AS LEAD ARRANGER AND BOOK MANAGER and KEYBANK NATIONAL ASSOCIATION AS SYNDICATION AGENT and CITIBANK, N.A. AS AGENT 2 TABLE OF CONTENTS ----------------- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01 Certain Defined Terms.................................. 1 SECTION 1.02 Computation of Time Periods............................ 11 SECTION 1.03 Accounting Terms....................................... 11 ARTICLE II AMOUNTS OF TERMS OF THE ADVANCES SECTION 2.01 The Advances........................................... 11 SECTION 202 Making the Advances.................................... 11 SECTION 2.03 Fees................................................... 12 SECTION 2.04 Termination or Reduction of the Commitments............ 12 SECTION 2.05 Repayment of Advances.................................. 13 SECTION 2.06 Prepayments of Advances................................ 13 SECTION 2.07 Interest on Advances................................... 13 SECTION 2.08 Interest Rate Determination............................ 14 SECTION 2.09 Optional Conversion of Advances........................ 15 SECTION 2.10 Increased Costs........................................ 15 SECTION 2.11 Illegality............................................. 16 SECTION 2.12 Payments and Computations.............................. 16 SECTION 2.13 Taxes.................................................. 17 SECTION 2.14 Sharing of Payments, Etc............................... 18 ARTICLE III CONDITIONS TO EFFECTIVENESS OF SECTIONS 2.01 SECTION 3.01 Conditions Precedent to Effectiveness of Sections 2.01. 19 SECTION 3.02 Conditions Precedent to Each Borrowing................. 20 SECTION 3.03 Determinations Under Section 3.01...................... 20 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01 Representations and Warranties of the Borrower......... 21 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01 Affirmative Covenants.................................. 23 SECTION 5.02 Negative Covenants..................................... 25 SECTION 5.03 Financial Covenants.................................... 29 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01 Events of Default...................................... 30 i 3 ARTICLE VII THE AGENT SECTION 7.01 Authorization and Action............................... 31 SECTION 7.02 Agent's Reliance, Etc.................................. 32 SECTION 7.03 Citibank and Affiliates................................ 32 SECTION 7.04 Lender Credit Decision................................. 32 SECTION 7.05 Indemnification........................................ 32 SECTION 7.06 Successor Agent........................................ 33 ARTICLE VIII MISCELLANEOUS SECTION 8.01 Amendments, Etc........................................ 33 SECTION 8.02 Notices, Etc........................................... 33 SECTION 8.03 No Waiver; Remedies.................................... 34 SECTION 8.04 Costs and Expenses..................................... 34 SECTION 8.05 Right of Set-off....................................... 35 SECTION 8.06 Binding Effect......................................... 35 SECTION 8.07 Assignments and Participations......................... 35 SECTION 8.08 Confidentiality........................................ 37 SECTION 8.09 Governing Law.......................................... 38 SECTION 8.10 Execution in Counterparts.............................. 38 SECTION 8.11 Jurisdiction, Etc...................................... 38 ii 4 Schedules - --------- Schedule I - List of Applicable Lending Offices Schedule 3.01(b) - Disclosed Litigation Schedule 5.02(a) - Existing Liens Exhibits - -------- Exhibit A-1 - Form of Revolving Credit Note Exhibit A-2 - Form of Term Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D-1 - Form of Opinion of Jones, Day, Reavis & Pogue, counsel for the Borrower Exhibit D-2 - Form of Opinion of Thomas A. Koza, Esq., counsel for the Borrower iii 5 CREDIT AGREEMENT Dated as of October 11, 2000 THE NORTH AMERICAN COAL CORPORATION, a Delaware corporation (the "BORROWER"), the banks, financial institutions and other institutional lenders (the "INITIAL LENDERS") listed on the signature pages hereof, and CITIBANK, N.A. ("CITIBANK"), as agent (the "AGENT") for the Lenders (as hereinafter defined), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ADVANCE" means a Revolving Credit Advance or a Term Advance. "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "AGENT'S ACCOUNT" means the account of the Agent maintained by the Agent at Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. 36852248, Attention: Jason Trala. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "APPLICABLE MARGIN" means as of any date, a percentage per annum determined by reference to the Debt/EBITDA Ratio in effect on such date as set forth below:
---------------------- ----------------------- ------------------------- -------------------------- Debt/EBITDA Ratio Applicable Margin for Applicable Margin for Applicable Margin for Base Rate Advances Eurodollar Rate Eurodollar Rate Term Revolving Credit Advances Advances ---------------------- ----------------------- ------------------------- -------------------------- LEVEL 1 Less than or equal 0.00% 0.850% 1.000% to 2.0 to 1.0 ---------------------- ----------------------- ------------------------- -------------------------- LEVEL 2 Greater than 2.0 to 0.00% 0.925% 1.125% 1.0 but less than or equal to 2.5 to 1.0 ---------------------- ----------------------- ------------------------- -------------------------- LEVEL 3 Greater than 2.5 to 0.00% 1.000% 1.250% 1.0 but less than or equal to 2.75 to 1.0 ---------------------- ----------------------- ------------------------- --------------------------
6 LEVEL 4 Greater than 2.75 to 0.00% 1.450% 1.750% 1.0 but less than 3.0 to 1.0 ---------------------- ----------------------- ------------------------- -------------------------- LEVEL 5 Greater than or 0.00% 1.850% 2.250% equal to 3.0 to 1.0 ---------------------- ----------------------- ------------------------- --------------------------
The Applicable Margin for each Advance shall be determined by reference to the ratio in effect from time to time; PROVIDED, HOWEVER, that (A) through March 31, 2001, the Applicable Margin shall be at Level 5, (B) no change in the Applicable Margin shall be effective until three Business Days after the date on which the Agent receives the certificate of a Responsible Officer of the Borrower demonstrating such ratio required to be delivered pursuant to Section 5.01(h)(i) or (ii), as the case may be, and (C) the Applicable Margin shall be at Level 5 for so long as the Borrower has not submitted to the Agent the certificate described in clause (B) of this proviso as and when required under Section 5.01(h)(i) or (ii), as the case may be. "APPLICABLE PERCENTAGE" means, as of any date a percentage per annum determined by reference to the Debt/EBITDA Ratio in effect on such date as set forth below:
------------------------------------- ----------------------------------- Debt/EBITDA Ratio Applicable Percentage ------------------------------------- ----------------------------------- LEVEL 1 Less than or equal to 2.0 to 1.0 0.150% ------------------------------------- ----------------------------------- LEVEL 2 Greater than 2.0 to 1.0 but less 0.200% than or equal to 2.5 to 1.0 ------------------------------------- ----------------------------------- LEVEL 3 Greater than 2.5 to 1.0 but less 0.250% than or equal to 2.75 to 1.0 ------------------------------------- ----------------------------------- LEVEL 4 Greater than 2.75 to 1.0 but less 0.300% than 3.0 to 1.0 ------------------------------------- ----------------------------------- LEVEL 5 Greater than or equal to 3.0 to 1.0 0.400% ------------------------------------- -----------------------------------
The Applicable Percentage shall be determined by reference to the ratio in effect from time to time; PROVIDED, HOWEVER, that (A) through March 31, 2001, the Applicable Percentage shall be at Level 5, (B) no change in the Applicable Percentage shall be effective until three Business Days after the date on which the Agent receives the certificate of a Responsible Officer of the Borrower demonstrating such ratio required to be delivered pursuant to Section 5.01(h)(i) or (ii), as the case may be, and (C) the Applicable Percentage shall be at Level 5 for so long as the Borrower has not submitted to the Agent the certificate described in clause (B) of this proviso as and when required under Section 5.01(h)(i) or (ii), as the case may be. "APPROPRIATE LENDER" means, at any time, with respect to either of the Term or Revolving Credit Facilities, a Lender that has a Commitment with respect to such Facility at such time. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit C hereto. "BASE RATE" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: 2 7 (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per annum, PLUS (ii) the rate obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average (adjusted to the basis of a year of 360 days) being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York in Federal Reserve Statistical Release H.15(519) or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month U.S. dollar non-personal time deposits in the United States, PLUS (iii) the average during such three-week period of the annual assessment rates estimated by Citibank for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank in the United States; and (c) 1/2 of one percent per annum above the Federal Funds Rate. "BASE RATE ADVANCE" means an Advance that bears interest as provided in Section 2.07(a)(i). "BORROWING" means a Revolving Credit Borrowing or a Term Borrowing. "BUSINESS DAY" means a day of the year on which commercial banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "COMMITMENT" means a Term Commitment or a Revolving Credit Commitment. "CONFIDENTIAL INFORMATION" means information that the Borrower furnishes to the Agent or any Lender in a writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or becomes available to the Agent or such Lender from a source other than the Borrower. "CONSOLIDATED" refers to the consolidation of accounts in accordance with GAAP. "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.08 or 2.09. "DEBT" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person's business and amounts owed to NACCO under the Tax Sharing Agreement and/or in respect of state taxes paid by NACCO on behalf of the Borrower and its Subsidiaries), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or 3 8 sale of such property), (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit, surety bonds or similar extensions of credit, (g) all net payment obligations of such Person in respect of Hedge Agreements, (h) all Debt of others referred to in clauses (a) through (g) above or clause (i) below guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (1) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (3) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (4) otherwise to assure a creditor against loss, and (i) all Debt referred to in clauses (a) through (h) above secured by any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. "DEBT/EBITDA RATIO" means, at any date of determination, the ratio of Consolidated Recourse Debt of the Borrower and its Subsidiaries as at the end of the most recently ended fiscal quarter of the Borrower for which financial statements are required to be delivered to the Lenders pursuant to Section 5.01(h)(i) or (ii), as the case may be, to Consolidated EBITDA of the Borrower and its Subsidiaries for such fiscal quarter and the immediately preceding three fiscal quarters; PROVIDED that, except to the extent otherwise provided in the definition of EBITDA, any Debt and/or EBITDA attributable to Mississippi Lignite Mining Co. shall be excluded from Consolidated Recourse Debt and Consolidated EBITDA, respectively, for each fiscal quarter of fiscal year 2000. "DEFAULT" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "DISCLOSED LITIGATION" has the meaning specified in Section 3.01(b). "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "EBITDA" means, for any period, net income (or net loss) PLUS the sum of (a) interest expense on Consolidated Recourse Debt (including, without limitation, letter of credit fees in respect of letters of credit included in Consolidated Recourse Debt), (b) income tax expense, (c) depreciation, depletion and amortization expense of the Borrower and all Non-Project Mining Subsidiaries, (d) negative extraordinary items, (e) negative cumulative effect of accounting changes, (f) loss from discontinued operations, (g) minority interest charges, (h) the PRODUCT of (x) equity in earnings of unconsolidated Affiliates MULTIPLIED BY (y) the tax rate of such unconsolidated Affiliates DIVIDED BY (z) (1 minus such tax rate), (i) operating lease payments under lease agreements subject to letters of credit included in Consolidated Recourse Debt, (j) negative non-recurring items, (k) equity contributions from, and subordinated Debt owing to, NACCO to the extent not used for Investments pursuant to Section 5.02(e)(viii) and (l) liquidated damages payments and any penalty payments received by Mississippi Lignite Mining Co. ("MLMC") from Tractebel Power, Inc. in accordance with the sales contract between MLMC and Tractebel Power, Inc. dated April 1, 1998, LESS (i) positive extraordinary items, (ii) positive cumulative effect of accounting changes, (iii) income from discontinued operations, (iv) minority interest credits, (v) the PRODUCT of (x) equity in loss of unconsolidated Affiliates MULTIPLIED BY (y) the tax rate of such unconsolidated Affiliates DIVIDED BY (z) (1 minus such tax rate), and (vi) positive non-recurring items, in each case for the Borrower and its Consolidated Subsidiaries and determined in accordance with GAAP for such period; PROVIDED that, for purposes of calculating the Debt/EBITDA Ratio or the Fixed Charge Coverage Ratio at March 31, 2001, June 30, 2001 and September 30, 2001, Consolidated EBITDA shall be deemed to be Consolidated EBITDA for the one, two or three fiscal quarters then ended multiplied by 4, 2 or 4/3, as the case may be. 4 9 "EFFECTIVE DATE" has the meaning specified in Section 3.01. "ELIGIBLE ASSIGNEE" means (i) a Lender, (ii) an Affiliate of a Lender and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 8.07, the Borrower, such approval, in either case, not to be unreasonably withheld or delayed; PROVIDED, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "ENVIRONMENTAL ACTION" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "ENVIRONMENTAL LAW" means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, human health, human safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "ENVIRONMENTAL PERMIT" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA AFFILIATE" means any Person that for purposes of Title IV of ERISA is a member of the Borrower's controlled group, or under common control with the Borrower, within the meaning of Section 414 of the Internal Revenue Code. "ERISA EVENT" means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. 5 10 "EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "EURODOLLAR RATE" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on Telerate Markets Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a period equal to such Interest Period or, if for any reason such rate is not available, the rate per annum at which deposits in U.S. dollars are offered by the principal office of the Reference Bank in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the Reference Bank's Eurodollar Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period, SUBJECT, HOWEVER, to the provisions of Section 2.08 by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. "EURODOLLAR RATE ADVANCE" means an Advance that bears interest as provided in Section 2.07(a)(ii). "EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "FACILITY" means the Term Facility or the Revolving Credit Facility. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "FIXED CHARGE COVERAGE RATIO" means the ratio set forth in Section 5.03(b). "GAAP" has the meaning specified in Section 1.03. "HAZARDOUS MATERIALS" means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. 6 11 "HEDGE AGREEMENTS" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements. "INFORMATION MEMORANDUM" means the information memorandum dated June 15, 2000 used by the Agent in connection with the syndication of the Commitments. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, with respect to Eurodollar Rate Advances, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, or if available by all Lenders, nine or twelve months, as the Borrower may, upon notice received by the Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period, select; PROVIDED, HOWEVER, that: (i) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance that ends after any principal repayment installment date unless, after giving effect to such selection, the aggregate principal amount of Base Rate Advances and of Eurodollar Rate Advances having Interest Periods that end on or prior to such principal repayment installment date shall be at least equal to the aggregate principal amount of Advances due and payable on or prior to such date; (ii) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration; (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, PROVIDED, HOWEVER, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iv) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder. "INVESTMENT" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities or all or substantially all of the assets of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any arrangement pursuant to which the investor incurs Debt of the types referred to in clauses (h) and (i) of the definition of "DEBT" in respect of such Person. 7 12 "LENDERS" means the Initial Lenders and each Person that shall become a party hereto pursuant to Section 8.07. "LIEN" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "MARKETABLE SECURITIES" means any of the following, to the extent owned by the Borrower or any of its Subsidiaries free and clear of all Liens and having a maturity of not greater than 360 days from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) insured certificates of deposit of or time deposits or Eurodollar deposits with any commercial bank that is a Lender or a member of the Federal Reserve System, is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1 billion or (c) commercial paper in an aggregate amount of no more than $1,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States and rated at least "Prime-1" (or the then equivalent grade) by Moody's Investors Service or "A-1" (or the then equivalent grade) by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "MATERIAL ADVERSE CHANGE" means any material adverse change in the business, condition (financial or otherwise) or results of operations, of the Borrower and its Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, condition (financial or otherwise) or results of operations the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or any Lender under this Agreement or any Note or (c) the ability of the Borrower to perform its obligations under this Agreement or any Note. "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NACCO" means NACCO Industries, Inc., a Delaware corporation. "NET CASH PROCEEDS" means, with respect to the incurrence or issuance of any Debt by any Person, the aggregate amount of cash received from time to time by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions and (b) the amount of taxes payable in connection with or as a result of such transaction, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid to a Person that is not an Affiliate of such Person and are properly attributable to such transaction. "NON-PROJECT MINING SUBSIDIARY" means a Subsidiary other than a Project Mining Subsidiary. "NONRECOURSE DEBT" means any Debt other than Recourse Debt. "NOTE" means a Revolving Credit Note or a Term Note. 8 13 "NOTICE OF BORROWING" has the meaning specified in Section 2.02(a). "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "PHILLIPS PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated the date hereof among Phillips Petroleum Company, Phillips Coal Company, North Gillette Limited Liability Company and The North American Coal Corporation. "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PROJECT MINING SUBSIDIARY" means any Subsidiary of the Borrower (a) whose Debt is Non-recourse Debt and (b) the utility customers of which finance or guarantee the financing and certain other obligations of such Subsidiary. "RECOURSE DEBT" of any Person means all items that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of such Person (other than trade payables incurred in the ordinary course of business and amounts owed to NACCO under the Tax Sharing Agreement and/or in respect of state taxes paid by NACCO on behalf of the Borrower and its Subsidiaries) plus Debt comprised of letters of credit that support obligations under operating leases, but shall not include indebtedness as to which no recourse may be asserted against the Borrower or any of its Non-Project Mining Subsidiaries except to the extent that such indebtedness is secured by a Lien on specified assets of the Borrower or any of its Non-Project Mining Subsidiaries. "REFERENCE BANK" means Citibank. "REGISTER" has the meaning specified in Section 8.07(d). "REQUIRED LENDERS" means at any time Lenders owed at least 66 2/3% in interest of the then aggregate unpaid principal amount of the Advances, or, if no such principal amount is then outstanding, Lenders having at least 66 2/3% in interest of the Commitments. "RESPONSIBLE OFFICER" means any of the following officers of the Borrower: the chairman of the board of directors, chief executive officer, president, secretary, any vice president and, with respect to financial matters, the chief financial officer, treasurer or controller of the Borrower. "REVOLVING CREDIT ADVANCE" has the meaning specified in Section 2.01(b). "REVOLVING CREDIT BORROWING" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by each of the Revolving Credit Lenders pursuant to Section 2.01. "REVOLVING CREDIT COMMITMENT" means, with respect to any Revolving Credit Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Revolving Credit Commitment" or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by Agent pursuant to Section 8.07(d) as such Lender's "Revolving Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.04. "REVOLVING CREDIT FACILITY" means, at any time, the aggregate amount of the Revolving Credit Lender's Revolving Credit Commitments at such time and the Revolving Credit Advances made thereunder. 9 14 "REVOLVING CREDIT LENDER" means any Lender that has a Revolving Credit Commitment. "REVOLVING CREDIT NOTE" means a promissory note of the Borrower payable to the order of any Revolving Credit Lender, in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances made by such Lender. "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the Borrower and such ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "SPC" has the meaning specified in Section 8.07(f) hereto. "SUBSIDIARY" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "TAX SHARING AGREEMENT" means that certain Amended Tax Sharing Agreement between NACCO and its Subsidiaries, dated May 14, 1997, related to the allocation of federal tax liabilities among NACCO and its Consolidated U.S. Subsidiaries, as amended, supplemented or otherwise modified from time to time. "TERM ADVANCE" has the meaning specified in Section 2.01(a). "TERM BORROWING" means a borrowing consisting of simultaneous Term Advances of the same Type made by the Term Lenders. "TERM COMMITMENT" means, with respect to any Term Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Term Commitment" or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(d) as such Lender's "Term Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.04. "TERM FACILITY" means, at any time, the aggregate amount of the Term Lenders' Term Commitments at such time and the Term Advances made thereunder. "TERM LENDER" means any Lender that has a Term Commitment. "TERM NOTE" means a promissory note of the Borrower payable to the order of any Term Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from the Term Advance made by such Lender, as amended. "TERMINATION DATE" means the earlier of October 11, 2005 and the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01. "TYPE" means, as to any Advance, its nature as a Base Rate Advance or Eurodollar Rate Advance. 10 15 "VOTING STOCK" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "WITHDRAWAL LIABILITY" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e) ("GAAP"). ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. THE ADVANCES. (a) THE TERM ADVANCES. Each Term Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "TERM ADVANCE") to the Borrower on the Effective Date in an amount not to exceed such Lender's Term Commitment at such time. The Term Borrowing shall consist of Term Advances made simultaneously by the Term Lenders ratably according to their Term Commitments. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. (b) THE REVOLVING CREDIT ADVANCES. Each Revolving Credit Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a "REVOLVING CREDIT ADVANCE") to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date in an amount for each such Advance not to exceed such Lender's unused Revolving Credit Commitment at such time. Each Revolving Credit Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Credit Advances made simultaneously by the Revolving Credit Lenders ratably according to their Revolving Credit Commitments. Within the limits of each Revolving Credit Lender's unused Revolving Credit Commitment in effect from time to time, the Borrower may borrow under this Section 2.01(b), prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(b). SECTION 2.02. MAKING THE ADVANCES. (a) Each Borrowing shall be made on notice, given not later than (x) 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances or (y) 12:00 noon (New York City time) on the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which shall give to each Appropriate Lender prompt notice thereof by telecopier or telex. Each such notice of a Borrowing (a "NOTICE OF BORROWING") shall be by telephone, confirmed immediately in writing, or telecopier or telex in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Facility under which such Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such Borrowing, and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Appropriate Lender shall, before 2:00 P.M. (New York City time) on the date of such Borrowing make available for the account of its Applicable Lending Office to the Agent at the Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing in accordance with the respective Commitments under the applicable Facility of such Lender and the other Appropriate Lenders. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at the Agent's address referred to in Section 8.02. (b) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant 11 16 to Section 2.08 or 2.11 and (ii) the Eurodollar Rate Advances may not be outstanding as part of more than ten separate Borrowings. (c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Appropriate Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (d) Unless the Agent shall have received notice from an Appropriate Lender prior to the date of any Borrowing that such Lender will not make available to the Agent such Lender's ratable portion of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent, such Lender and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. FEES. (a) FACILITY FEE. The Borrower agrees to pay to the Agent for the account of each Revolving Credit Lender a facility fee on the aggregate amount of such Lender's Revolving Credit Commitment from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Applicable Percentage in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing September 30, 2000, and on the Termination Date. (b) AGENT'S FEES. The Borrower shall pay to the Agent for its own account such fees as may from time to time be agreed between the Borrower and the Agent. SECTION 2.04. TERMINATION OR REDUCTION OF THE COMMITMENTS. (a) OPTIONAL. The Borrower shall have the right, upon at least three Business Days' notice to the Agent, to terminate in whole or reduce ratably in part the unused portions of the Revolving Credit Commitments and the Term Commitments, PROVIDED that each partial reduction of a Facility (i) shall be in the aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably among the Appropriate Lenders in accordance with their Commitments with respect to such Facility. (b) MANDATORY. On the date of the Term Borrowing, after giving effect to such Term Borrowing, and from time to time thereafter upon each repayment or prepayment of the Term Advances, the aggregate Term Commitments of the Term Lenders shall be automatically and permanently reduced on a pro rata basis by an amount equal to the amount by which (i) the aggregate Term Commitments immediately prior to such reduction EXCEEDS (ii) the aggregate unpaid principal amount of all Term Advances outstanding at such time. 12 17 SECTION 2.05. REPAYMENT OF ADVANCES. (a) TERM ADVANCES. The Borrower shall repay to the Agent for the ratable account of the Term Lenders the aggregate outstanding principal amount of the Term Advances on the following dates in the amounts indicated (which amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.06): -------------------------------------- ------------------ DATE AMOUNT -------------------------------------- ------------------ October 11, 2001 $15,000,000 -------------------------------------- ------------------ October 11, 2002 $15,000,000 -------------------------------------- ------------------ October 11, 2003 $15,000,000 -------------------------------------- ------------------ October 11, 2004 $15,000,000 -------------------------------------- ------------------ October 11, 2005 $55,000,000 -------------------------------------- ------------------ PROVIDED, HOWEVER, that the final principal installment shall be repaid on the Termination Date and in any event shall be in an amount equal to the aggregate principal amount of the Term Advances outstanding on such date. (b) REVOLVING CREDIT ADVANCES. The Borrower shall repay to the Agent for the ratable account of the Revolving Credit Lenders on the Termination Date the aggregate principal amount of the Revolving Credit Advances then outstanding. SECTION 2.06. PREPAYMENTS OF ADVANCES. (a) OPTIONAL. The Borrower may, upon notice at least two Business Days' prior to the date of such prepayment, in the case of Eurodollar Rate Advances, and not later than 12:00 noon (New York City time) on the date of such prepayment, in the case of Base Rate Advances, to the Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; PROVIDED, HOWEVER, that (x) each partial prepayment shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(c). Each such prepayment of any Term Advances shall be applied to the installments thereof as the Borrower may direct. (b) MANDATORY. The Borrower shall, on the date of receipt of the Net Cash Proceeds by the Borrower or any of its Non-Project Mining Subsidiaries from the incurrence or issuance by the Borrower or any such Subsidiaries of any debt securities in the capital markets which is Recourse Debt with a maturity in excess of one year and in an amount of $1,000,000 or more, prepay an aggregate principal amount of the Term Advances comprising part of the same Borrowings in an amount equal to the amount of such Net Cash Proceeds. Each such prepayment shall be applied ratably to the Term Facility and to the installments thereof in inverse order of maturity. All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. SECTION 2.07. INTEREST ON ADVANCES. (a) SCHEDULED INTEREST. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (i) BASE RATE ADVANCES. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time PLUS (y) the Applicable Margin in effect from time to time, payable in arrears quarterly on the last day of each March, 13 18 June, September and December during such periods and on the date such Base Rate Advance shall be paid in full. (ii) EURODOLLAR RATE ADVANCES. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Advance PLUS (y) the Applicable Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (b) DEFAULT INTEREST. Upon the occurrence and during the continuance of an Event of Default under Section 6.01(a), the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above. SECTION 2.08. INTEREST RATE DETERMINATION. (a) The Reference Bank agrees to furnish to the Agent timely information for the purpose of determining each Eurodollar Rate. The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.07(a)(i) or (ii), and the rate, if any, furnished by the Reference Bank for the purpose of determining the interest rate under Section 2.07(a)(ii). Any change in the interest rate on an Advance resulting from a change in the Base Rate or the Eurocurrency Reserve Requirement shall become effective as of the opening of business on the day on which such change becomes effective. (b) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (c) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, be Converted into Base Rate Advances. (d) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Advances shall automatically Convert into Base Rate Advances. (e) Upon the occurrence and during the continuance of any Event of Default, (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended. (f) If Telerate Markets Page 3750 is unavailable and the Reference Bank fails to furnish timely information to the Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, 14 19 (i) the Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances, (ii) with respect to Eurodollar Rate Advances, each such Advance will automatically, on the last day of the then existing Interest Period therefor, be prepaid by the Borrower or be automatically Converted into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii) the obligation of the Lenders to make Eurodollar Rate Advances or to Convert Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.09. OPTIONAL CONVERSION OF ADVANCES. The Borrower may on any Business Day, upon notice given to the Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.08 and 2.11, Convert all Advances of one Type comprising the same Borrowing into Advances of the other Type; PROVIDED, HOWEVER, that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b) and no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(b). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower. SECTION 2.10. INCREASED COSTS. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances in an amount deemed by such Lender to be material (excluding for purposes of this Section 2.10 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.13 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, promptly after demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; PROVIDED, HOWEVER, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to the Borrower and the Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines that compliance with the adoption of or any change in any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) made after the date hereof affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type by an amount deemed by such Lender to be material, then, promptly after demand by such Lender (with a copy of such demand to the Agent), the Borrower shall pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder; PROVIDED that the Borrower shall not be required to compensate a Lender pursuant to this Section 2.10(b) for any amounts incurred more than twelve months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; and PROVIDED FURTHER that if the circumstances giving rise to such claim have a retroactive effect, then such twelve-month period shall be extended to include the period of such retroactive effect. A certificate as to such amounts 15 20 submitted to the Borrower and the Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.11. ILLEGALITY. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will automatically, upon such demand, Convert into a Base Rate Advance and (b) the obligation of the Lenders to make Eurodollar Rate Advances or to Convert Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist; PROVIDED, HOWEVER, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION 2.12. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make each payment hereunder and under the Notes, irrespective of any counterclaim or set-off, not later than 12:00 noon (New York City time) on the day when due to the Agent at the Agent's Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.10, 2.13 or 8.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Acceptance, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under the Notes held by such Lender, to charge from time to time against any or all of the Borrower's accounts with such Lender any amount so due. (c) All computations of interest based on the Base Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, all computations of interest based on the Eurodollar Rate or the Federal Funds Rate and of facility fees shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or facility fees are payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; PROVIDED, HOWEVER, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest 16 21 thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. (f) If the Agent receives funds for application to the obligations of the Borrower hereunder under circumstances for which this Agreement does not specify the Advances or the Facility to which, or the manner in which, such funds are to applied, the Agent may, but shall not be obligated to, elect to distribute such funds to each Lender ratably in accordance with such Lender's proportionate share of the principal amount of all outstanding Advances, in repayment or prepayment of such of the outstanding Advances or other obligations owed to such Lender, and for application to such principal installments, as the Agent shall direct. SECTION 2.13. TAXES. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.12, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, in the case of each Lender and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.13) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER TAXES"). (c) The Borrower shall indemnify each Lender and the Agent for and hold it harmless against the full amount of Taxes or Other Taxes (including, without limitation, taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.13) imposed on or paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Agent, at its address referred to in Section 8.02, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder or under the Notes by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Agent, at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "UNITED STATES" and "UNITED STATES PERSON" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender and on the date of the Assumption Agreement or the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender, and from time to time thereafter as requested in writing by the Borrower (but only so long as such Lender remains lawfully able to do so), shall provide each of the Agent and the Borrower with two original Internal Revenue Service forms W-8BEN or W-8ECI or (in the case of a Lender that has certified in writing to the Agent that it is not a "bank" as defined in Section 881(c)(3)(A) of the Internal Revenue Code) form W-8BEN or such other form as the Borrower, in its discretion, believes is necessary under the Treasury Regulations (and, if such 17 22 Lender has so certified that it is not a "bank", a certificate representing that such Lender is not a "bank" for purposes of Section 881(c) of the Internal Revenue Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower and is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or entitled to a reduced rate of United States federal withholding tax on payments pursuant to this Agreement or the Notes or (in the case of a Lender certifying that it is not a "bank"), certifying that such Lender is a foreign corporation, partnership, estate or trust and is the beneficial owner of the interest. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; PROVIDED, HOWEVER, that, if at the date of the Assignment and Acceptance pursuant to which a Lender assignee becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date but at a rate not in excess of the rate applicable to the Lender assignor as of such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8BEN or W-8ECI or other applicable form (or the related certificate described above), that the Lender reasonably considers to be confidential, the Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. (f) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form described in Section 2.13(e) (OTHER THAN if such failure is due to a change in law occurring subsequent to the date on which a form originally was required to be provided, or if such form otherwise is not required under subsection (e) above), such Lender shall not be entitled to indemnification under Section 2.13(a) or (c) with respect to Taxes imposed by the United States by reason of such failure; PROVIDED, HOWEVER, that should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as the Lender shall reasonably request to assist the Lender to recover such Taxes. (g) Any Lender claiming any additional amounts payable pursuant to this Section 2.13 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Eurodollar Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION 2.14. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.10, 2.13 or 8.04(c)) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, PROVIDED FURTHER that, so long as the obligations of the Borrower under this Agreement and the Notes shall not have been accelerated, any excess payment received by any Appropriate Lender shall be shared on a pro rata basis only with other Appropriate Lenders. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. 18 23 SECTION 2.15. USE OF PROCEEDS. The proceeds of the Advances shall be available (and the Borrower agrees that it shall use such proceeds) solely for general corporate purposes of the Borrower and its Subsidiaries, including liquidity support for commercial paper and acquisition financing. ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SECTIONS 2.01. Section 2.01 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied: (a) There shall have occurred no Material Adverse Change since December 31, 1999. (b) There shall exist no action, suit, investigation, litigation or proceeding affecting the Borrower or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect other than the matters described on Schedule 3.01(b) hereto (the "DISCLOSED LITIGATION") or (ii) purports to affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby, and there shall have been no adverse change in the status, or financial effect on the Borrower or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 3.01(b) hereto. (c) The Agent shall have completed a due diligence investigation of the Borrower and its Subsidiaries in scope, and with results, reasonably satisfactory to the Lenders, and nothing shall have come to the attention of the Lenders during the course of such due diligence investigation to lead them to believe that the Information Memorandum was or has become misleading, incorrect or incomplete in any material respect; without limiting the generality of the foregoing, the Lenders shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries as they shall have requested. (d) All governmental and third party consents and approvals necessary in connection with the transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not acceptable to the Lenders) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lenders that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (e) The Borrower shall have notified each Lender and the Agent in writing as to the proposed Effective Date. (f) The Borrower shall have paid all reasonable accrued fees and expenses of the Agent (including the accrued reasonable fees and expenses of counsel to the Agent). (g) On the Effective Date, the following statements shall be true and the Agent shall have received for the account of each Lender a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that: (i) The representations and warranties contained in Section 4.01 are correct on and as of the Effective Date, and (ii) No event has occurred and is continuing that constitutes a Default. 19 24 (h) The Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Agent and (except for the Notes) in sufficient copies for each Lender: (i) The Notes to the order of the Lenders. (ii) Certified copies of the resolutions of the Board of Directors of the Borrower approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes. (iii) A certificate of the Secretary or an Assistant Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder. (iv) A reserve and operational audit, in form and substance satisfactory to the Lenders, from John T. Boyd Company. (v) A favorable opinion of (A) Jones, Day, Reavis & Pogue, counsel for the Borrower, substantially in the form of Exhibit D-1 hereto and (B) Thomas A. Koza, Esq., Vice President-Law and Administration of the Borrower, substantially in the form of Exhibit D-2 hereto and, in each case, as to such other matters as any Lender through the Agent may reasonably request. (vi) A favorable opinion of Shearman & Sterling, counsel for the Agent, in form and substance satisfactory to the Agent. (i) The Borrower shall have terminated the commitments, and paid in full all Debt, interest, fees and other amounts outstanding, under the $50,000,000 Credit Agreement dated as of September 21, 1991 among the Borrower, the lenders parties thereto and Morgan Guaranty Trust Company of New York, as agent for such lenders, and each of the Lenders that is a party to such $50,000,000 Credit Agreement hereby waives, upon execution of this Agreement the three Business Days notice required by Section 2.07 of such Credit Agreement relating to the termination of commitments thereunder. SECTION 3.02. CONDITIONS PRECEDENT TO EACH BORROWING. The obligation of each Appropriate Lender to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Borrowing the following statements shall be true (and each of the giving of the applicable Notice of Borrowing and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing such statements are true): (a) the representations and warranties contained in Section 4.01 (except the representations set forth in the last sentence of subsection (e) thereof and in subsection (f)(i) thereof) are correct on and as of such date, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and (b) no event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, that constitutes a Default. SECTION 3.03. DETERMINATIONS UNDER SECTION 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower, by 20 25 notice to the Lenders, designates as the proposed Effective Date, specifying its objection thereto. The Agent shall promptly notify the Lenders of the occurrence of the Effective Date. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes, and the consummation of the transactions contemplated hereby, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's charter or by-laws or (ii) any applicable law or any material contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes. (d) This Agreement has been, and each of the Notes when delivered hereunder will have been, duly executed and delivered by the Borrower. This Agreement is, and each of the Notes when delivered hereunder will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms. (e) The Consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at December 31, 1999, and the related Consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for the fiscal year then ended, accompanied by an opinion of Arthur Andersen LLP, independent public accountants, and the Consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at March 31, 2000, and the related Consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for the three months then ended, duly certified by a Responsible Officer of the Borrower, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheet as at March 31, 2000, and said statements of income and cash flows for the three months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Consolidated Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Consolidated Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 1999, there has been no Material Adverse Change. (f) There is no pending or, to the knowledge of the Borrower, threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) purports to materially adversely affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby, and there has been no adverse change in the status, or financial effect on the Borrower or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 3.01(b) hereto. (g) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or 21 26 carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock, except to the extent of advances or distributions made by the Borrower to NACCO to purchase shares of NACCO capital stock. (h) The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. (i) The operations and properties of the Borrower and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past material non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing obligations or costs, and no circumstances exist that could be reasonably likely to (i) form the basis of an Environmental Action against the Borrower or any of its Subsidiaries or any of their properties that could reasonably be expected to have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that could reasonably be expected to have a Material Adverse Effect. (j) Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) none of the properties currently or formerly owned or operated by the Borrower or any of its Subsidiaries is listed or proposed for listing on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("NPL") or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency ("CERCLIS") or any analogous foreign, state or local list or, to the best knowledge of the Borrower, is adjacent to any such property; (ii) there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any property currently or formerly owned or operated by the Borrower or any of its Subsidiaries or, to the best of its knowledge, on any property formerly owned or operated by the Borrower or any of its Subsidiaries; (iii) there is no asbestos or asbestos-containing material on any property currently owned or operated by the Borrower or any of its Subsidiaries; and (iv) Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by the Borrower or any of its Subsidiaries or, to the best of its knowledge, any adjoining property. (k) Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) neither the Borrower nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law; and (ii) all Hazardous Materials generated, used, treated, handled or stored at or transported to or from any property currently or formerly owned or operated by the Borrower or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material liability to the Borrower or any of its Subsidiaries. (l) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan. (m) As of the last annual actuarial valuation date, the funded current liability percentage, as defined in Section 302(d)(8) of ERISA, of each Plan exceeds 90%; and there has been no material adverse change in the funding status of any such Plan since such date. (n) Neither the Borrower nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan. (o) Neither the Borrower nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the 22 27 meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will: (a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its Subsidiaries to comply with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and Environmental Laws as provided in Section 5.01(i), except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect. (b) PAYMENT OF TAXES, ETC. Pay and discharge, and cause each of its Subsidiaries (other than the Project Mining Subsidiaries) to pay and discharge, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien (other than a Lien permitted by Section 5.02(a)(iv)) upon its property; PROVIDED, HOWEVER, that neither the Borrower nor any of such Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. The Borrower will cause each Project Mining Subsidiary to pay and discharge at or before the due date thereof, all of its income tax liabilities and obligations under the Tax Sharing Agreement. (c) MAINTENANCE OF INSURANCE. Maintain, and cause each of its Non-Project Mining Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. (d) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and cause (or with respect to any Project Mining Subsidiary, will use its best efforts to cause) each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises except, in the case of Subsidiaries, to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect; PROVIDED, HOWEVER, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(b) and PROVIDED FURTHER that neither the Borrower nor any of its Subsidiaries shall be required to preserve any right or franchise if the Board of Directors of the Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Subsidiary or the Lenders. (e) VISITATION RIGHTS. At any reasonable time and from time to time, permit the Agent or any of the Lenders or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants at the expense of the Borrower only upon the occurrence of and during the continuance of an Event of Default. (f) KEEPING OF BOOKS. Keep proper consolidated books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the consolidated accounts of the Borrower and its Subsidiaries in accordance with generally accepted accounting principles in effect from time to time. 23 28 (g) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause (or with respect to any Project Mining Subsidiary, will use its best efforts to cause) each of its Subsidiaries to maintain and preserve, all of its properties that are used and necessary and useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (h) REPORTING REQUIREMENTS. Furnish to the Lenders: (i) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, the Consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and Consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by a Responsible Officer of the Borrower as having been prepared in accordance with generally accepted accounting principles and certificates of a Responsible Officer of the Borrower as to compliance with the terms of this Agreement and setting forth in reasonable detail (x) the calculations necessary to demonstrate compliance with Section 5.03, (y) the Investments made pursuant to Section 5.02(e)(e)(vi), (vii) and (viii) during such fiscal quarter and (z) the Restricted Payments made pursuant to Section 5.02(f) during such fiscal quarter, PROVIDED that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (ii) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the Borrower and its Consolidated Subsidiaries, containing the Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and Consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for such fiscal year, in each case accompanied by an opinion reasonably acceptable to the Required Lenders by Arthur Andersen LLP or other independent public accountants reasonably acceptable to the Required Lenders and certificates of a Responsible Officer of the Borrower as to compliance with the terms of this Agreement and setting forth in reasonable detail (x) the calculations necessary to demonstrate compliance with Section 5.03, (y) the Investments made pursuant to Section 5.02(e)(e)(vi), (vii) and (viii) during such fiscal year and (z) the Restricted Payments made pursuant to Section 5.02(f) during such fiscal year, PROVIDED that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (iii) as soon as possible and in any event within five days after the occurrence of each Default continuing on the date of such statement, a statement of a Responsible Officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all reports, if any, that the Borrower sends to any of its securityholders other than NACCO, and copies of all reports and registration statements that the Borrower or its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; (v) promptly after the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(f); 24 29 (vi) (A) promptly and in any event within 30 days after the Borrower or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a statement of a Responsible Officer of the Borrower describing such ERISA Event and the action, if any, that the Borrower or such ERISA Affiliate has taken and proposes to take with respect thereto and (B) on the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information; (vii) promptly and in any event within two Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (viii) promptly and in any event within 30 days after the receipt thereof by the Borrower or any ERISA Affiliate, a copy of the annual actuarial report for each Plan the funded current liability percentage (as defined in Section 302(d)(8) of ERISA) of which is less than 90% or the unfunded current liability of which exceeds $14,000,000; (ix) promptly and in any event within five Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (A) the imposition of Withdrawal Liability by any such Multiemployer Plan, (B) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the amount of liability incurred, or that may be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (A) or (B); (x) promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by the Borrower or any of its Subsidiaries with any Environmental Law or Environmental Permit that could reasonably be expected to have a Material Adverse Effect; and (xi) such other information respecting the Borrower or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request. (i) COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and cause each of its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew and cause each of its Subsidiaries to obtain and renew all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; PROVIDED, HOWEVER, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (j) DELIVERY OF RECLAMATION PLANS. If an Event of Default shall have occurred and be continuing, at the request of the Agent, provide to the Lenders promptly, at the expense of the Borrower, the reclamation plan for the properties described in such request indicating the presence or absence of Hazardous Materials and the estimated cost of any legally required compliance with applicable laws, removal or remedial action in connection with any Hazardous Materials on such properties. SECTION 5.02. NEGATIVE COVENANTS. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not: 25 30 (a) LIENS, ETC. Create or suffer to exist, or permit any of its Non-Project Mining Subsidiaries to create or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Non-Project Mining Subsidiaries to assign, any right to receive income, other than: (i) purchase money Liens upon or in any real property or equipment or other fixed or capital assets acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such property or equipment or other fixed or capital assets or to secure Debt incurred solely for the purpose of financing the acquisition of such property or equipment or other fixed or capital assets, or Liens existing on such property or equipment or other fixed or capital assets at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such property) or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, PROVIDED, HOWEVER, that no such Lien shall extend to or cover any properties of any character other than the real property or equipment or other fixed or capital assets being acquired, and no such extension, renewal or replacement shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed or replaced, (ii) the Liens existing on the Effective Date and described on Schedule 5.02(a) hereto, (iii) Liens securing Debt other than Recourse Debt in an aggregate principal amount not to exceed $1,000,000 at any time outstanding, (iv) such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (A) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(B) hereof; (C) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings and for which appropriate reserves are being maintained in accordance with generally accepted accounting principles; (C) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations including, without limitation, unemployment insurance and other social security legislation; and (D) easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially interfere with the use of such property for its present purposes, (v) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case for any Non-Project Mining Subsidiaries and incurred in the ordinary course of business, (vi) legal or equitable encumbrances deemed to exist by reason of the existence of any litigation or other legal proceeding or arising out of a judgment or award with respect to which an appeal is being prosecuted, to the extent the amount thereof (in excess of applicable insurance coverage) does not exceed, individually or in the aggregate, $15,000,000, but only so long as such legal or equitable encumbrances (A) are being actively contested in good faith by appropriate proceedings or (B) are paid or otherwise discharged within ten days after a Responsible Officer obtains knowledge thereof, (vii) environmental Liens with respect to liabilities in an aggregate amount (in excess of applicable insurance coverage) not exceeding $1,000,000 (A) to the extent such liabilities are not yet due or which are being contested in good faith by appropriate proceedings and with respect 26 31 to which appropriate reserves have been established or (B) which are released or otherwise discharged within ten days after a Responsible Officer obtains knowledge thereof, (viii) Liens arising pursuant to Section 412(n) of the Internal Revenue Code or Section 4068(a) of ERISA with respect to liabilities in an aggregate amount not exceeding $1,000,000 if (A) the defaulted payments to which such Liens relate are made within ten days after a Responsible Officer obtains knowledge of such defaulted payments and such Liens are released as promptly as practicable thereafter or (B) the obligation to make such payments is being contested in good faith by appropriate proceedings and with respect to which appropriate reserves have been established, (ix) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased, (x) options granted to the customer of any Project Mining Subsidiary to acquire the capital stock of such Project Mining Subsidiary pursuant to the mining or lignite sales agreement relating to such Project Mining Subsidiary, (xi) restrictions on the transferability of the capital stock of any Project Mining Subsidiary without the consent of the customers of such Project Mining Subsidiary, (xii) options or rights granted to (A) the customer of any Project Mining Subsidiary to acquire the capital stock of such Project Mining Subsidiary and certain assets of such Project Mining Subsidiary and (B) the Borrower to transfer to the customer of any Project Mining Subsidiary the capital stock of such Project Mining Subsidiary, in each case in connection with the termination, if any, of the mining or lignite sales agreement relating to such Project Mining Subsidiary, (xiii) rights of any Project Mining Subsidiary to transfer to the customer of such Project Mining Subsidiary or an affiliate of such customer any interest in real property acquired by any Project Mining Subsidiary from such affiliate, (xiv) rights of any customer of any other Project Mining Subsidiary to acquire, or rights of the Borrower or such Project Mining Subsidiary to transfer to such customer, the capital stock of such Project Mining Subsidiary or the assets of such Project Mining Subsidiary pursuant to any mining agreement or coal sales agreement entered into after the date hereof by such Project Mining Subsidiary and such customer, to the extent that such rights are exercisable in connection with the termination of such mining agreement or coal sales agreement, (xv) rights of any customer of the Borrower or any Subsidiary to acquire, or rights of the Borrower or such Subsidiary to transfer to such customer, certain assets or other property of the Borrower (other than property that constitutes capital stock of a Subsidiary) or such Subsidiary acquired by the Borrower or such Subsidiary after the date hereof and used solely in connection with the development and operation of coal mines or the development and mining of coal reserves (including the sale and delivery of coal therefrom) by the Borrower or such Subsidiary and such customer, to the extent that (A) such rights are exercisable in connection with the termination of such mining agreement or coal sales and (B) the aggregate book value of the assets and other property subject to such rights does not exceed $7,500,000, (xvi) other Liens securing Recourse Debt in an aggregate principal amount not to exceed $1,000,000 at any time outstanding, and (xvii) the replacement, extension or renewal of any Lien permitted by clause (ii) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal 27 32 (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby. The Borrower may at any time or from time to time request that the amount under sub-clause (B) of clause (xv) above of the aggregate book value of assets and other property permitted to be subject to the rights described in such clause (xv) be increased to permit additional assets or other property to be subject to such rights in connection with a transaction entered into or proposed to be entered into with a customer of the Borrower or a Subsidiary if such transaction would cause the aggregate book value of all assets and other property subject to such rights to exceed $7,500,000, such request to be made by notice to the Agent and the Lenders setting forth information with respect to the assets or other property (including, without limitation, the estimated book value thereof) proposed to be subject to such rights and the nature of such transaction and such rights. Each Lender agrees to consider in good faith such request and shall use its best efforts to respond to such request, whether affirmatively or negatively, within 30 days of its receipt for such request from the Borrower. Upon the consent of the Required Lenders to any such transaction, such amount in such sub-clause (B) shall thereupon, and for all purposes thereafter, be deemed to be increased so as to permit such assets or other property to be subject to such rights pursuant to such transaction, and the Agent shall promptly so notify the Borrower. (b) MERGERS, ETC. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any Person, or permit any of its Subsidiaries to do so, except that (i) any Subsidiary of the Borrower may merge or consolidate with or into, or dispose of assets to, any other Subsidiary of the Borrower, (ii) any Project Mining Subsidiary may merge or consolidate with or into, or dispose of assets to, its utility customers, (iii) any Subsidiary may merge or consolidate with or into any Person if such Subsidiary is the surviving entity and (iv) any Subsidiary of the Borrower may merge into or dispose of assets to the Borrower, PROVIDED, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. (c) ACCOUNTING CHANGES. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles. (d) CHANGE IN NATURE OF BUSINESS. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof. (e) INVESTMENTS IN OTHER PERSONS. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person other than: (i) Investments by the Borrower and its Subsidiaries in the Consolidated Subsidiaries of the Borrower; (ii) loans and advances to employees in the ordinary course of the business (including for travel, entertainment and relocation expenses) of the Borrower and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $1,000,000 at any time outstanding; (iii) Investments in Marketable Securities; (iv) Investments consisting of intercompany Debt within the group of the Borrower and its Subsidiaries; (v) Investments consisting of trade credit in the ordinary course of business; 28 33 (vi) Investments consisting of loans and advances to NACCO made by the Borrower in the ordinary course of business (which loans and advances are of the same kind and for the same purposes as currently exist between the Borrower and NACCO); (vii) Investments made with the proceeds of subordinated debt issued to NACCO and/or equity contributions from NACCO; and (viii) other Investments; PROVIDED that with respect to Investments made under this clause (viii), (A) immediately before and after giving effect thereto, no Default shall have occurred and be continuing or would result therefrom, (B) any company or business acquired or invested in pursuant to this clause (viii) shall be in the same line of business as the Borrower or any of its Subsidiaries or in power plants fueled by coal (except that the Borrower may make Investments in connection with the development of power plants (other than nuclear power plants) in Mississippi to the extent of its right to participate in such development as set forth in the Phillips Purchase Agreement) and (C) immediately after giving effect to such Investment pursuant to this clause (viii), the Debt/EBITDA Ratio as of the last day of the fiscal quarter ending immediately prior to the date such Investment is made, giving pro forma effect to such Investment as if it had been made on the last day of such fiscal quarter, does not exceed 3.25 to 1.00, as evidenced by a certificate of a Responsible Officer of the Borrower delivered to the Lenders demonstrating such compliance. (f) RESTRICTED PAYMENTS. Directly or indirectly, or permit any of its Subsidiaries to (i) declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any equity interests of the Borrower or any Subsidiary, whether now or hereafter outstanding, or make any other distribution in respect thereof either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary or (ii) otherwise make any distribution to NACCO, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (other than distributions payable solely in common stock of the Person making such distributions) (collectively, "RESTRICTED PAYMENTS"), except that: (A) the Borrower or any Subsidiary may make any Restricted Payment so long as the Debt/EBITDA Ratio as of the last day of the fiscal quarter ending immediately prior to the date of such Restricted Payment, giving pro forma effect to such Restricted Payment as if it had occurred on the last day of such fiscal quarter, does not exceed 3.25 to 1.00; (B) notwithstanding the provisions of clause (A) above, the Borrower may make Restricted Payments to NACCO (i) in respect of the Borrower's allocable share of NACCO's overhead and other selling, general and administrative expenses (including legal, accounting, other professional fees and costs) incurred in the ordinary course of business, (ii) in respect of liabilities of NACCO arising from, in connection with or relating to the closing of certain mining operations of Bellaire Corporation, (iii) in respect of amounts due to NACCO under the Tax Sharing Agreement and (iv) in respect of state taxes paid by NACCO on behalf of the Borrower and its Subsidiaries; and (C) notwithstanding the provisions of clause (A) above, any Subsidiary may make Restricted Payments to the Borrower. (g) OPERATING COVENANT. Permit the delivery or stockpile of the Mississippi Lignite Mining Company to be less than 300,000 tons of lignite in the fourth fiscal quarter of fiscal year 2000. SECTION 5.03. FINANCIAL COVENANTS. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will: 29 34 (a) DEBT/EBITDA RATIO. Maintain a Debt/EBITDA Ratio of not more than 2.25:1.00 through December 31, 2000, 3.90:1.00 from January 1, 2001 through December 31, 2001 and 3.50:1 thereafter. (b) FIXED CHARGE COVERAGE RATIO. Maintain a ratio of Consolidated EBITDA of the Borrower and its Non-Project Mining Subsidiaries to the sum of interest payable on, and amortization of debt discount in respect of, all Consolidated Recourse Debt during such period, by the Borrower and its Non-Project Mining Subsidiaries for each period of four fiscal quarters of not less than 3.00:1 from January 1, 2001 until December 31, 2001 and not less than 4.00:1 thereafter; PROVIDED that, for purposes of calculating the Fixed Charge Coverage Ratio at March 31, 2001, June 30, 2001 and September 30, 2001, the amount of such interest payable and amortization of debt discount included in the denominator thereof shall be the amount thereof for the period of one, two or three fiscal quarters then ended multiplied by 4, 2 or 4/3, as the case may be. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Advance when the same becomes due and payable; or the Borrower shall fail to pay any interest on any Advance or make any other payment of fees or other amounts payable under this Agreement or any Note within three Business Days after the same becomes due and payable; or (b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made; or (c) (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(d), (e) or (h), 5.02 or 5.03 or (ii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender; or (d) The Borrower or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Debt (excluding any Nonrecourse Debt or Debt of any Project Mining Subsidiary) that is outstanding in a principal or net amount of at least $10,000,000 in the aggregate (but excluding Debt outstanding hereunder) of the Borrower or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (e) The Borrower or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or 30 35 any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Judgments or orders for the payment of money in excess of $10,000,000 in the aggregate shall be rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 20 days from the entry thereof; PROVIDED, HOWEVER, that any such judgment or order shall not be an Event of Default under this Section 6.01(f) if and for so long as (i) the amount of such judgment or order is covered by a valid and binding policy of insurance between the defendant and the insurer covering payment thereof and (ii) such insurer, which shall be rated at least "A" by A.M. Best Company, has been notified of, and has not disputed the claim made for payment of, the amount of such judgment or order; or (g) NACCO shall cease to own, directly or indirectly, at least 51% of the Voting Stock of the Borrower; or (h) Any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Borrower and the ERISA Affiliates related to such ERISA Event) exceeds $14,000,000; or (i) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $10,000,000 or requires payments exceeding $2,500,000 per annum; or (j) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Borrower and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $10,000,000; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; PROVIDED, HOWEVER, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. 31 36 ARTICLE VII THE AGENT SECTION 7.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; PROVIDED, HOWEVER, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (i) may treat the payee of any Note as the holder thereof until the Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. CITIBANK AND AFFILIATES. With respect to its Commitment, the Advances made by it and the Note issued to it, Citibank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any such Subsidiary, all as if Citibank were not the Agent and without any duty to account therefor to the Lenders. SECTION 7.04. LENDER CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Advances then owed to each of them (or if no Advances are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any action taken or omitted by 32 37 the Agent under this Agreement (collectively, the "INDEMNIFIED COSTS"), PROVIDED that no Lender shall be liable for any portion of the Indemnified Costs resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Agent, any Lender or a third party. SECTION 7.06. SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent with the consent, unless a Default has occurred and is continuing, of the Borrower (which consent shall not be unreasonably withheld or delayed). If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE VIII MISCELLANEOUS SECTION 8.01. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; PROVIDED, HOWEVER, that (a) no amendment, waiver or consent shall, unless in writing and signed by all the Lenders affected thereby, do any of the following: (i) waive any of the conditions specified in Section 3.01, (ii) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder or (iii) amend this Section 8.01 and (b) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender that has a Commitment under the Term Facility or the Revolving Credit Facility if such Lender is directly affected by such amendment, waiver or consent, (i) increase the Commitments of the Lenders, (ii) reduce the principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender, (iii) postpone any date fixed for any payment of principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender or (iv) change the order of application of any prepayment set forth in Section 2.06 in any manner that materially affects such Lender; and PROVIDED FURTHER that (x) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note and (y) no amendment, waiver or consent of Section 8.07(f) shall, unless in writing and signed by each Lender that has granted a funding option to an SPC in addition to the Lenders required above to take such action, affect the rights or duties of such Lender or SPC under this Agreement or any Note. SECTION 8.02. NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed or delivered, if to the Borrower, at its address at Signature Place II, 14785 Preston Road, Suite 1100, Dallas, Texas 75240-7891, Attention: K. Donald Grischow; if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at Two Penns 33 38 Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department; or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed, telecopied, telegraphed or telexed, be effective when deposited in the mails, telecopied, delivered to the telegraph company or confirmed by telex answerback, respectively, except that notices and communications to the Agent pursuant to Article II, III or VII shall not be effective until received by the Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. COSTS AND EXPENSES. (a) The Borrower agrees to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, (A) all due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, consultant, and audit expenses and (B) the reasonable fees and expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, reasonable fees and expenses of counsel for the Agent and each Lender in connection with the enforcement of rights under this Section 8.04(a). (b) The Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "INDEMNIFIED PARTY") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower also agrees not to assert any claim for special, indirect, consequential or punitive damages against the Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, arising out of or otherwise relating to the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 18(d) or (e), 2.09 or 2.12, acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or by an Eligible Assignee to a Lender other than on the last day of the Interest Period for such Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 8.07 as a result of a demand by the Borrower pursuant to Section 8.07(a), the Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss, cost or expense 34 39 incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Sections 2.10, 2.13 and 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes. SECTION 8.05. RIGHT OF SET-OFF. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its Affiliates may have. SECTION 8.06. BINDING EFFECT. This Agreement shall become effective (other than Section 2.01, which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by the Borrower and the Agent and when the Agent shall have been notified by each Initial Lender that such Initial Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 8.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may with the consent of the Agent and, unless an Event of Default has occurred and is continuing at the time of such assignment, the Borrower (which consent, in each case, shall not be unreasonably withheld or delayed) and, if demanded by the Borrower (following (x) a demand by such Lender pursuant to Section 2.10 or 2.13, (y) a default by such Lender in the performance of its obligations hereunder or (z) such Lender's refusal to approve any amendment or waiver to this Agreement requested by the Borrower) upon at least five Business Days' notice to such Lender and the Agent, will assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under and in respect of one or more Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, (x) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof under each Facility for which a Commitment is being assigned and (y) no assignment which would result in any Lender holding less than $5,000,000 under any Facility shall be permitted, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment made as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower after consultation with the Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (v) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and until such Lender shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement, and (vi) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note subject to such assignment and a processing and recordation fee of $3,500 payable by the parties to each such 35 40 assignment, PROVIDED, HOWEVER, that in the case of each assignment made as a result of a demand by the Borrower, such recordation fee shall be payable by the Borrower except that no such recordation fee shall be payable in the case of an assignment made at the request of the Borrower to an Eligible Assignee that is an existing Lender, and (vii) any Lender may, without the approval of the Borrower and the Agent, assign all or a portion of its rights to any of its Affiliates. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Section 2.10, 2.13 and 8.04 to the extent any claim thereunder relates to an event arising prior such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under each Facility pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder under such Facility, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1 or A-2 hereto, as the case may be. (d) The Agent, acting for this purpose (but only for this purpose) as the agent of the Borrower, shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 36 41 (e) Each Lender may sell participations to one or more banks or other entities (other than the Borrower or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (f) Each Lender may grant to a special purpose funding vehicle (an "SPC") the option to fund all or any part of any Advance that such Lender is obligated to fund under this Agreement (and upon the exercise by such SPC of such option to fund, such Lender's obligations with respect to such Advance shall be deemed satisfied to the extent of any amounts funded by such SPC); PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (iv) any such option granted to an SPC shall not constitute a commitment by such SPC to fund any Advance, (v) neither the grant nor the exercise of such option to an SPC shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement (including, without limitation, its obligations under Section 2.09) and (vi) no SPC shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, nor any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such grant of funding option, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such grant of funding option. Each party to this Agreement hereby agrees that no SPC shall be liable for any indemnity or payment under this Agreement for which a Lender would otherwise be liable. Subject to the foregoing provisions of this clause (f), an SPC shall have all the rights of the granting Lender. An SPC may assign or participate all or a portion of its interest in any Advances to the granting Lender or to any financial institution providing liquidity or credit support to or for the account of such SPC without paying any processing fee therefor and, in connection therewith may disclose on a confidential basis any information relating to the Borrower to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancements to such SPC. In furtherance of the foregoing, each party hereto agrees (which agreements shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. (g) Any Lender may, in connection with any assignment, participation or grant of funding option or proposed assignment, participation or grant of funding option pursuant to this Section 8.07, disclose to the assignee, participant or SPC or proposed assignee, participant or SPC any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; PROVIDED, HOWEVER, that, prior to any such disclosure, the assignee, participant or SPC or proposed assignee, participant or SPC shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender. (h) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. 37 42 SECTION 8.08. CONFIDENTIALITY. Neither the Agent nor any Lender or SPC shall disclose any Confidential Information to any other Person without the consent of the Borrower, other than (a) to the Agent's or such Lender's Affiliates and their officers, directors, employees, agents, attorneys, accountants and advisors and, as contemplated by Section 8.07(f), to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process and (c) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking. SECTION 8.09. GOVERNING LAW. This Agreement and the Notes shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. SECTION 8.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 8.11. JURISDICTION, ETC. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the Notes, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. The Borrower hereby agrees that service of process in any such action or proceeding brought in the any such New York State court or in such federal court may be made upon CT Corporation System at its offices at 111 Eighth Avenue, 13th Floor, New York, New York 10011 (the "PROCESS AGENT") and the Borrower hereby irrevocably appoints the Process Agent its authorized agent to accept such service of process, and agrees that the failure of the Process Agent to give any notice of any such service shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. The Borrower hereby further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any parties hereto by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address specified pursuant to Section 8.02. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or the Notes in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. [Rest of page intentionally left blank] 38 43 SECTION 8.12. WAIVER OF JURY TRIAL. Each of the Borrower, the Agent and the Lenders hereby irrevocably and unconditionally waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the Notes or the actions of the Agent or any Lender in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE NORTH AMERICAN COAL CORPORATION By /s/ Clifford R. Miercort ----------------------------------------- Title: President and Chief Executive Officer CITIBANK, N.A., as Agent By /s/ Steven R. Victorin ----------------------------------------- Title: Managing Director INITIAL LENDERS CITIBANK, N.A. By /s/ Steven R. Victorin ----------------------------------------- Title: Managing Director BANK ONE, NA By /s/ Mary Lu D. Cramer ----------------------------------------- Title: Vice President KEYBANK NATIONAL ASSOCIATION By /s/ Marianne T. Miel ----------------------------------------- Title: Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ Richard C. Munisch ----------------------------------------- Title: Managing Director 39 44 EXHIBIT A-1 - FORM OF REVOLVING CREDIT PROMISSORY NOTE U.S.$_______________ Dated: _______________, 200_ FOR VALUE RECEIVED, the undersigned, THE NORTH AMERICAN COAL CORPORATION, a Delaware corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of _________________________ (the "LENDER") for the account of its Applicable Lending Office on the Termination Date (each as defined in the Credit Agreement referred to below) the principal sum of U.S.$[amount of the Lender's Commitment in figures] or, if less, the aggregate principal amount of the Revolving Credit Advances made by the Lender to the Borrower pursuant to the Credit Agreement dated as of October 11, 2000 among the Borrower, the Lender and certain other lenders parties thereto, and Citibank, N.A. as Agent for the Lender and such other lenders (as amended or modified from time to time, the "CREDIT AGREEMENT"; the terms defined therein being used herein as therein defined) outstanding on the Termination Date. The Borrower promises to pay interest on the unpaid principal amount of each Revolving Credit Advance from the date of such Revolving Credit Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citibank, as Agent, at 399 Park Avenue, New York, New York 10043, in same day funds. Each Revolving Credit Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note PROVIDED, HOWEVER, that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower under this Promissory Note. This Promissory Note is one of the Revolving Credit Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Revolving Credit Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Revolving Credit Advance being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. THE NORTH AMERICAN COAL CORPORATION By ------------------------------------- Title: 45 ADVANCES AND PAYMENTS OF PRINCIPAL - ------------------------------------------------------------------------------ AMOUNT OF DATE AMOUNT OF PRINCIPAL PAID UNPAID PRINCIPAL NOTATION ADVANCE OR PREPAID BALANCE MADE BY - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 2 46 EXHIBIT A-2 - FORM OF TERM PROMISSORY NOTE U.S.$_______________ Dated: _______________, 200_ FOR VALUE RECEIVED, the undersigned, THE NORTH AMERICAN COAL CORPORATION, a Delaware corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of _________________________ (the "LENDER") for the account of its Applicable Lending Office on the Termination Date (each as defined in the Credit Agreement referred to below) the principal sum of U.S.$[amount of the Lender's Commitment in figures] or, if less, the aggregate principal amount of the Term Advance made by the Lender to the Borrower pursuant to the Credit Agreement dated as of October 11, 2000 among the Borrower, the Lender and certain other lenders parties thereto, and Citibank, N.A. as Agent for the Lender and such other lenders (as amended or modified from time to time, the "CREDIT AGREEMENT"; the terms defined therein being used herein as therein defined) on the dates and in the amounts specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of the Term Advance from the date of the Term Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citibank, as Agent, at 399 Park Avenue, New York, New York 10043, in same day funds. The Term Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note PROVIDED, HOWEVER, that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower under this Promissory Note. This Promissory Note is one of the Term Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of a single Term Advance by the Lender to the Borrower in an amount not to exceed the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from such Term Advance being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. THE NORTH AMERICAN COAL CORPORATION By __________________________ Title: 47 ADVANCES AND PAYMENTS OF PRINCIPAL - ------------------------------------------------------------------------------ AMOUNT OF DATE AMOUNT OF PRINCIPAL PAID UNPAID PRINCIPAL NOTATION ADVANCE OR PREPAID BALANCE MADE BY - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 2 48 EXHIBIT B - FORM OF NOTICE OF BORROWING Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below Two Penns Way New Castle, Delaware 19720 [Date] Attention: Bank Loan Syndications Department Ladies and Gentlemen: The undersigned, The North American Coal Corporation, refers to the Credit Agreement, dated as of October 11, 2000 (as amended or modified from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "PROPOSED BORROWING") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is _______________, 200_. (ii) The Facility under which the Proposed Borrowing is requested is the [Term][Revolving Credit] Facility. (iii) The Type of Advances comprising the Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. (iv) The aggregate amount of the Proposed Borrowing is $_______________. [(v) The initial Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is _____ month[s].] The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in Section 4.01 of the Credit Agreement (except the representations set forth in the last sentence of subsection (e) thereof and in subsection (f)(i) thereof) are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and 49 (B) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default. Very truly yours, THE NORTH AMERICAN COAL CORPORATION By ---------------------------------------- Title: 2 50 EXHIBIT C - FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of October 11, 2000 (as amended or modified from time to time, the "CREDIT AGREEMENT") among The North American Coal Corporation, a Delaware corporation (the "BORROWER"), the Lenders (as defined in the Credit Agreement) and Citibank, N.A., as agent for the Lenders (the "AGENT"). Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule I hereto agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement Facility or Facilities specified on Schedule 1 hereto. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the Advances owing to the Assignee will be as set forth on Schedule 1 hereto. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note or Notes held by the Assignor and requests that the Agent exchange such Note or Notes for a new Note or Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new Notes payable to the order of such Assignee in an amount equal to the Commitments assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitments retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service forms required under Section 2.13 of the Credit Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "EFFECTIVE DATE") shall be the date of acceptance hereof by the Agent, unless otherwise specified on Schedule 1 hereto. 5. Upon such acceptance and recording by the Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 51 6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and facility fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. 2 52 Schedule 1 to Assignment and Acceptance As to the Revolving Credit Facility: Percentage interest assigned: _____% Assignee's Revolving Credit Commitment: $______ Aggregate outstanding principal amount of Revolving Credit Advances assigned: $______ Principal amount of Revolving Credit Note payable to Assignee: $______ Principal amount of Revolving Credit Note payable to Assignor: $______ As to the Term Facility: Percentage interest assigned: _____% Assignee's Term Commitment: $______ Aggregate outstanding principal amount of Term Advances assigned: $______ Principal amount of Term Note payable to Assignee: $______ Principal amount of Term Note payable to Assignor: $______ Effective Date*: _______________, 200_
[NAME OF ASSIGNOR], as Assignor By __________________________ Title: Dated: _______________, 200_ [NAME OF ASSIGNEE], as Assignee By __________________________ Title: Dated: _______________, 200_ - ---------- * This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to the Agent. 3 53 Domestic Lending Office: [Address] Eurodollar Lending Office: [Address] Accepted [and Approved]** this __________ day of _______________, 200_ CITIBANK, N.A., as Agent By _______________________ Title: [Approved this __________ day of _______________, 200_ THE NORTH AMERICAN COAL CORPORATION By ]* ------------------------------------------ Title: - ---------- ** Required if the Assignee is an Eligible Assignee solely by reason of clause (iii) of the definition of "Eligible Assignee". * Required if the Assignee is an Eligible Assignee solely by reason of clause (iii) of the definition of "Eligible Assignee". 4 54 EXHIBIT D-1 OPINION OF JONES DAY October __, 2000 Citibank, N.A., as Agent under the Credit Agreement, as hereinafter defined (the "Agent") and The Lenders parties to the Credit Agreement Re: Credit Agreement, dated as of October __, 2000 (the "Credit Agreement") among The North American Coal Corporation, a Delaware corporation (the "company"), the lenders identified in the Credit Agreement and the Agent --------------------------------------------------------------- Ladies and Gentlemen: We have acted as special New York counsel for The North American Coal Corporation, a Delaware corporation (the "Company"), in connection with the preparation, execution and delivery of the Credit Agreement and the Notes delivered to the Lenders on the date hereof (the "Notes"), the Credit Agreement and the Notes being collectively referred to herein as the "Credit Documents." This opinion is delivered to you pursuant to Section 3.01(h)(v)(A) of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement. The Uniform Commercial Code, as amended and in effect in the State of New York, is referred to herein as the "NY UCC." With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of the assumptions or items upon which we have relied. In connection with the opinions expressed herein, we have examined such documents, records and matters of law as we have deemed necessary for the purposes of this opinion. We have examined, among other documents, the following: An executed copy of the Credit Agreement, signed by the Company and by the Agent and certain of the Lenders; An executed copy of each of the Notes; and The Officer's Certificate of the Company delivered to us in connection with this opinion, a copy of which is attached hereto as Annex A (the "Officer's Certificate"). In all such examinations, we have assumed, without independent investigation, the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, representations and warranties contained in the Credit Documents and certificates and oral or written statements and other information of or from representatives of the Company and others and assume compliance on the part of all parties to the Credit Documents with their covenants and agreements contained therein. As to the factual matters set forth therein, we have relied solely upon certificates of public officials. With respect to the opinions expressed in paragraph (a) below, our opinions are limited (x) to our actual knowledge, if any, of the 55 Company's specially regulated business activities and properties based solely upon an officer's certificate in respect of such matters and without any independent investigation or verification on our part and (y) to our review of only those laws and regulations that, in our experience, are normally applicable to transactions of the type contemplated by the Credit Documents. To the extent it may be relevant to the opinions expressed herein, we have assumed, without independent investigation, that the parties to the Credit Documents other than the Company have the power to enter into and perform such documents and to consummate the transactions contemplated thereby and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: The execution and delivery to the Agent and the Lenders by the Company of the Credit Documents and the performance by the Company of its obligations thereunder, (i) do not require under present law any filing or registration by the Company with, or approval or consent to the Company of, any governmental agency or authority of the State of New York or of the United States of America that has not been made or obtained except those required in the ordinary course of business in connection with the performance by the Company of its obligations under certain covenants contained in the Credit Documents, and (ii) do not violate any present law, or present regulation of any governmental agency or authority, of the State of New York or the United States of America known by us to be applicable to the Company or its property. The Credit Agreement constitutes, and each Note, upon delivery thereof and the making of the applicable initial Advances evidenced thereby, will constitute a valid and binding obligation of the Company enforceable in accordance with its respective terms. Assuming that the Company will comply with the provisions of the Credit Agreement relating to the use of proceeds, the borrowings by the Company under the Credit Agreement and the application of the proceeds thereof as provided in the Credit Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following qualifications: Our opinions above as to enforceability are subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer, voidable preference, moratorium or similar laws, and related judicial doctrines, from time to time in effect affecting creditors' rights and remedies generally and (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies), whether such principles are considered in a proceeding at law or in equity. In rendering this opinion, we have relied, with your permission, upon the opinion of Thomas A. Koza, Esq., the Vice President - Law and Administration of the Company, a copy of which has been furnished to you. We express no opinion as to the enforceability of any provision in the Credit Documents: relating to indemnification, contribution or exculpation in connection with violations of any statutory duties or public policy, or in connection with reckless or unlawful acts of the indemnified or exculpated party or the party receiving contribution; providing that any person or entity purchasing a participation from a Lender or other person or entity pursuant thereto may exercise set-off or similar rights with respect to such participation; relating to forum selection to the extent that the enforceability of any such provision is to be determined by any court other than a court of the State of New York; 2 56 relating to choice of governing law to the extent that the enforceability of any such provision is to be determined by any court other than a court of the State of New York; or specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of such Credit Documents. Our opinions as to enforceability are subject to the effect of generally applicable rules of law that: may, where less than all of a contract may be unenforceable, limit the enforceability of the balance of the contract to circumstances in which the unenforceable portion is not an essential part of the agreed exchange; and govern and afford judicial discretion regarding the determination of damages and entitlement to attorneys' fees and other costs. We express no opinion as to the enforceability of any purported waiver, release, variation, disclaimer, consent or other agreement to similar effect (all of the foregoing, collectively, a "Waiver") by the Company under any of the Credit Documents to the extent that such a Waiver applies to a right, claim, duty, defense or ground for discharge otherwise existing or occurring as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under and is not prohibited by or void or invalid under applicable law (including judicial decisions). For purposes of the opinions set forth in paragraph (b) above, we have assumed that (i) the Company is a corporation validly existing in good standing under the laws of the State of Delaware, has all requisite power and authority, and, other than as specifically stated in the opinion set forth in paragraph (a) above, has obtained all requisite corporate, shareholder, third party and governmental authorizations, consents and approvals, and made all requisite filings and registrations, necessary to execute, deliver and perform its obligations under the Credit Documents, and, other than as specifically stated in the opinion set forth in paragraph (a) above, that such execution, delivery and performance will not violate or conflict under any law, rule, regulation, order, decree, judgment, instrument or agreement binding upon or applicable to it or its properties, and (ii) the Credit Documents have been duly executed and delivered by the Company. For purposes of the opinion set forth in paragraph (c) above, we have assumed that (i) neither the Agent nor any of the Lenders has or will have the benefit of any agreement or arrangement (excluding the Credit Documents) pursuant to which any extensions of credit are directly or indirectly secured by Margin Stock, (ii) neither the Agent nor any of the Lenders nor any of their respective affiliates has extended or will extend any other credit to the Company directly or indirectly secured by Margin Stock and (iii) neither the Agent nor any of the Lenders has relied or will rely upon any Margin Stock as collateral in extending or maintaining any Advances pursuant to the Credit Agreement. The opinions expressed herein are limited to the federal laws of the United States of America and the laws of the State of New York and, to the extent relevant to the opinions expressed in paragraph (a) above, the General Corporation Law of the State of Delaware, as currently in effect. We express no opinion as to the compliance or noncompliance, or the effect of the compliance or noncompliance, of each of the addressees or any other person or entity with any state or federal laws or regulations applicable to each of them by reason of their status as or affiliation with a federally insured depository institution. Our opinions are limited to those expressly set forth herein, and we express no opinions by implication. The opinions expressed herein are solely for the benefit of the addressees hereof in connection with the transaction referred to herein and may not be relied on by such addressees for any other purpose or in any manner or for any purpose by any other person or entity. Dennis W. LaBarre, a partner in Jones, Day, Reavis & Pogue, is a Director of NACCO Industries, Inc., the parent of the Company, and a Director of the Company. 3 57 Very truly yours, JONES, DAY, REAVIS & POGUE Rev'd by --------------------------- 4 58 THE NORTH AMERICAN COAL CORPORATION OFFICER'S CERTIFICATE --------------------- The undersigned officer of The North American Coal Corporation, a Delaware corporation (the "Company"), hereby certifies, in connection with the execution, delivery and performance by the Company of the Credit Agreement, dated as of October __, 2000 (the "Credit Agreement"), among the Company, the lending institutions identified in the Credit Agreement (the "Lenders"), and Citibank, N.A. (the "Agent"), and with the consummation of the transactions contemplated thereby and the opinion of Jones, Day, Reavis & Pogue (the "Opinion") delivered in connection therewith, as follows (capitalized terms used herein and defined in the Credit Agreement shall have such defined meanings when used herein unless otherwise defined herein): The nature of the Company's business and the purpose of the Company is to engage in the following businesses and activities: ownership and operation of lignite coal surface mines for use as fuel by electrical utilities and for industrial purposes. In addition, the Company operates a dragline at a limerock quarry in southern Florida. The Company is not engaged in any activity or business not permitted pursuant to those provisions of its Certificate of Incorporation, as amended, specifying the nature of the Company's business and the purposes of the Company. The Company does not engage or propose to engage in any industry or business or activity, or own any property or asset, that causes or would cause it to be subject to special local, state or federal regulation not applicable to business corporations generally. IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of September, 2000. By: --------------------------------------- Name: Title: 59 EXHIBIT D-2 - FORM OF OPINION OF COUNSEL FOR THE BORROWER October __, 2000 Citibank, N.A., as Agent under the Credit Agreement, as hereinafter defined (the "Agent") and The Lenders parties to the Credit Agreement Re: Credit Agreement, dated as of October __, 2000 (the "Credit Agreement") among The North American Coal Corporation, a Delaware corporation (the "Company"), the Lenders identified in the Credit Agreement and the Agent ------------------------------------------------ Ladies and Gentlemen: I am the Vice President - Law and Administration for The North American Coal Corporation, a Delaware corporation (the "Company"), and have acted as such in connection with the preparation, execution and delivery of the Credit Agreement and the Notes delivered to the Lenders on the date hereof (the "Notes"), the Credit Agreement and the Notes being collectively referred to as the "Credit Documents." This opinion is delivered to you pursuant to Section 3.01(h)(v)(B) of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement. In connection with the opinions expressed herein, I have examined such documents, records and matters of law as I have deemed necessary for the purposes of this opinion. I have examined, among other documents, the following: An executed copy of the Credit Agreement, signed by the Company and by the Agent and certain of the Lenders; and An executed copy of each of the Notes. I, or attorneys over whom I exercise supervision, have also examined the originals, or copies certified to our satisfaction, of the agreements, instruments and other documents, and all of the orders, writs, judgments, awards, injunctions and decrees, which affect or purport to affect the ability of the Company to perform its obligations under the Credit Documents to which it is a party. In addition, I, or attorneys over whom I exercise supervision, have examined the originals, or copies certified to our satisfaction, of the Certificate of Incorporation and By-laws of the Company, and such other corporate records of the Company, certificates of public officials and of officers of the Company, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions hereinafter expressed. To the extent it may be relevant to the opinions expressed herein, I have assumed that the parties to the Credit Documents other than the Company have the power to enter into and perform such documents and to consummate the transactions contemplated thereby and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. The opinions expressed below are limited to the federal laws of the United States, and, to the extent relevant hereto, the General Corporation Law of the State of Delaware, as currently in effect. I assume no 60 obligation to supplement this opinion if any applicable laws change after the date hereof or if I become aware of any facts that might change the opinions expressed herein after the date hereof. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, I am of the opinion that: The Company (i) is a corporation duly incorporated, validly existing in good standing under the laws of the State of Delaware and (ii) has the corporate power and authority to enter into and to perform its obligations under the Credit Documents and to obtain extensions of credit under the Credit Agreement to the extent provided for therein. The Company possesses governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, the absence of which would have a Material Adverse Effect. The execution, delivery and performance by the Company of the Credit Documents are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action, consent or approval by or in respect of, or filing with, any governmental body, agency or official or other third party, do not contravene, or constitute a default under, any provision of applicable law, rule or regulation or of the Certificate of Incorporation or By-laws of the Company or of any material agreement binding upon the Company or any judgment, injunction, order, decree or other instrument binding upon the Company, and will not result in the creation or imposition of any lien on any asset of the Company or any of its Subsidiaries. The Credit Documents have been duly executed and delivered on behalf of the Company. There is no action, suit or proceeding pending against, or, to the best of my knowledge, threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official that purports to affect the legality, validity, binding effect or enforceability of the Credit Documents or the consummation of the transactions contemplated thereby or that are likely to have a Material Adverse Effect. This opinion is furnished by me, as counsel to the Company, to you solely for your benefit and solely with respect to the transactions contemplated by the Credit Documents upon the understanding that I am not hereby assuming any professional responsibility to any other person whatsoever. Very truly yours, ----------------------------------------- Vice President - Law and Administration, North American Coal Corporation 2 EX-10.LXIII 10 l87125bex10-lxiii.txt EXHIBIT 10(LXIII) 1 Exhibit 10(lxiii) ANNUAL INCENTIVE COMPENSATION PLAN ---------------------------------- 2001 GENERAL - ------- NACCO Materials Handling Group, Inc., (the "Company") has established an Annual Incentive Compensation Plan ("Plan") as part of a competitive compensation program for the officers and key management employees of the Company and its Subsidiaries. PLAN OBJECTIVE - -------------- The Company desires to attract and retain talented employees to enable the Company to meet its financial and business objectives. The objective of the Plan is to provide an opportunity to earn annual incentive compensation to those employees whose performance has a significant impact on the Company's short-term and long-term profitability. ADMINISTRATION AND PARTICIPATION - -------------------------------- The Plan is administered by the Nominating, Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee: a. May amend, modify or discontinue the Plan. b. Will approve participation in the Plan. Generally, participants will include all employees in NACCO Materials Handling Group salary grades 22 and above. However, the Committee may select any employee who has contributed significantly to the Company's profitability to participate in the Plan and receive an annual incentive compensation award. Subject to paragraphs (g) and (h), below, no employee of NACCO Materials Handling Group shall be eligible to be a participant in the Plan, and no participant in the Plan shall be eligible to receive an award, unless such individual is employed for at least 90 calendar days during the year. 2 c. Will determine the annual performance criteria which generate the incentive compensation pool. d. Will determine the total amount of both the target and actual annual incentive compensation pool. e. Will approve individual incentive compensation awards to officers and employees in NACCO Materials Handling Group above salary grade 29. f. May delegate to the Chief Executive Officer of the Company the approval of incentive compensation awards to NACCO Materials Handling Group employees in salary grade 29 and below. g. May consider at the end of each year the award of a discretionary bonus amount to non-participants as an addition to the regular incentive compensation pool on a special one-time basis to motivate individuals not eligible to participate in the Plan. h. May approve a pro-rate incentive compensation award for participants in the Plan whose employment is terminated (1) due to death, disability, retirement or facility closure, such award to be determined pursuant to the provisions of subparagraphs (e) and (f) above, or (2) under other circumstances at the recommendation of the Chief Executive Officer of the Company. DETERMINATION OF CORPORATE INCENTIVE COMPENSATION POOL - ------------------------------------------------------ Each participant in the Plan will have an individual target incentive compensation percentage which is determined by the participant's salary grade. This percentage is multiplied by the mid-point of the participant's salary grade to determine his individual target incentive compensation award. The total of the target incentive compensation awards of all participants equals the target corporate incentive compensation pool ("Target Pool"). The Target Pool is approved each year by the Committee. 3 The actual corporate incentive compensation pool ("Actual Pool") is determined at the end of each year based on the Company's actual performance against specific criteria established in the beginning of the year by the Committee. The Target Pool is adjusted upwards or downwards by corporate performance adjustment factors to determine the Actual Pool. In no event will the Actual Pool exceed 150% of the Target Pool, except to the extent that the Committee elects to increase the Actual Pool by up to 110%, as described below. The Target and Actual Pools may consist of the sum of two or more subpools, provided the subpools have individual objectives. It is the intent of the Plan that the Actual Pool, as determined above, will be the final total corporate incentive compensation pool. However, the Committee, in its sole discretion, may increase or decrease by up to 10% the Actual Pool or may approve an incentive compensation pool where there would normally be no pool due to Company performance which is below the criteria established for the year. The Actual and Target Pools exclude the Marketing Incentive Plan for regional parts, service, sales and national account managers. However, total compensation or employees covered by the Marketing Incentive Plan will be based on competitive levels. DETERMINATION OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS - --------------------------------------------------------- Salary grades and the corresponding target incentive percentages for each participant in the Plan will be established at the beginning of each year and approved by the Committee. Individual target incentive compensation will then be adjusted by the appropriate pool or subpool factor. Such adjusted individual incentive compensation will then be further modified based on the team performance to which an individual belongs compared to the team goals for the year, and may be further modified based on a Participant's performance as compared to their individual goals for the year. 4 The total of all individual incentive compensation awards must not exceed the Actual Pool for the Year. Below are examples of actual pool and individual award calculations. a. Example calculation for determination actual pool: INTENTIONALLY OMITTED b. Example calculation for determination of individual incentive compensation award: INTENTIONALLY OMITTED EX-10.LXIV 11 l87125bex10-lxiv.txt EXHIBIT 10(LXIV) 1 Exhibit 10 (lxiv) ================================================================================ NACCO MATERIALS HANDLING GROUP, INC. SENIOR EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN (EFFECTIVE AS OF JANUARY 1, 2000) ================================================================================ 1. PURPOSE OF THE PLAN The purpose of this January 1, 2000 Senior Executive Long Term Incentive Compensation Plan (the "Plan") is to further the long-term profits and growth of NACCO Materials Handling Group, Inc. (the "Company") by enabling the Company and its Subsidiaries to attract and retain key executive employees by offering long-term incentive compensation to those key executive employees who will be in a position to make significant contributions to such profits and 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" shall mean an award of Book Value Units granted to a Participant under this Plan for an Award Term in an amount determined pursuant to a formula which is established by the Committee not later than the 90th calendar day of the Award Term. Notwithstanding the foregoing, for the Award Term beginning on January 1, 2000, such formula shall be established by the Committee prior to or as soon as practicable following the adoption of the Plan. (b) "Award Units" shall mean Book Value Units which are issued pursuant to, and with such restrictions as are imposed by, the terms of this Plan. (c) "Award Unit Price" as to any Book Value Unit shall mean the Book Value on the Quarter Date coincident with or immediately preceding the Grant Date of the Award. (d) "Award Term" shall mean the period of one or more years on which an Award is based. (e) "Beneficiary" shall mean the person(s) designated in writing (on a form acceptable to the Committee) to receive the payment of all or part of an Award hereunder in the event of the death of a Participant. In the absence of such a designation and at anytime when there is no existing Beneficiary hereunder, Participant's Beneficiary shall be his surviving Spouse or, if none, his estate. 2 (f) "Book Value" as to any Book Value 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 on 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 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. (g) "Book Value Unit" or "Unit" shall mean a right granted pursuant to the terms and conditions set forth in Section 5. (h) "Committee" shall mean the Nominating, Organization and Compensation Committee of the Company's Board of Directors or any other committee appointed by the Company's Board of Directors to administer this Plan in accordance with Section 3. (i) "Grant Date" shall mean the effective date of an Award, as determined under Section 5(b)(ii) of the Plan. (j) "Guidelines" shall mean the guidelines that are approved by the Committee for each Award Term for the administration of the Awards granted under the Plan. To the extent that there is any inconsistency between the Guidelines and the Plan, the Guidelines shall control. (k) "Hay Salary Grade" shall mean the salary grade or points assigned to a Participant by the Company pursuant to the Hay Salary System, or any successor salary system subsequently adopted by the Company. (l) "Notional Shares" shall mean 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 the Plan, and shall equal 20 million shares on the effective date described in Section 10 hereof. 2 3 (m) "Participant" shall mean any person who meets the eligibility criteria set forth in Section 4 and who is granted an Award under the Plan. (n) "Quarter Date" shall mean the last business day of each calendar quarter. (o) "Retirement" or "Retire" shall mean the (i) termination of a U.S. Participant's employment with the Company and the Subsidiaries after the Participant has reached age 60 and completed at least 15 years of service, or (ii) termination of a non-U.S. Participant's employment with the Company and the Subsidiaries which qualifies as a retirement under local practices and procedures and/or which qualifies the non-U.S. Participant for foreign retirement benefits. (p) "Subsidiary" shall mean any (i) corporation, partnership or other entity, the majority of the outstanding voting securities of which is owned, directly or indirectly, by the Company or (ii) NMHG Distribution Co. and its subsidiaries. (q) "Target Award" shall mean the dollar value of the Award to be paid to a Participant under the Plan assuming that the performance targets are met. 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 (including, without limitation, the Guidelines), and to make all other determinations necessary or advisable for the administration of this Plan. A majority of the Committee shall constitute a quorum, and the action of members of the Committee present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the act of the Committee. All acts and decisions of the Committee with respect to any questions arising in connection with the administration and interpretation of this Plan, including the severability of any or all of the provisions hereof, shall be conclusive, final and binding upon the Company and all present and former Participants, all other employees of the Company and its Subsidiaries, and their respective descendants, successors and assigns. No member of the Committee shall be liable for any such act or decision made in good faith. 4. ELIGIBILITY 3 4 Any person who is classified by the Company or a Subsidiary as a salaried employee of the Company or any Subsidiary (including any Subsidiary acquired after adoption of this Plan) generally at a Hay Salary Grade of 25 or above (or a compensation level equivalent thereto), who in the judgment of the Committee occupies an officer or other key executive position in which his efforts may significantly contribute to the profits or growth of the Company or a Subsidiary, may be awarded Book Value Units. Notwithstanding the foregoing, the following persons shall not be eligible to participate in the Plan: (a) directors of the Company or any Subsidiary who are not classified as salaried employees of the Company or any Subsidiary, (b) leased employees (as such term is defined in Section 414 of the Internal Revenue Code (the "Code") and (c) salaried employees of the Company or a Subsidiary who are participants in the NACCO Materials Handling Group, Inc. Long Term Incentive Compensation Plan. A person who satisfies the requirements of this Section 4 shall become a Participant in the Plan when granted an Award hereunder. 5. GRANTING OF AWARDS The Committee may, from time to time and upon such conditions as it may determine, authorize the granting of Awards to Participants, which shall be not inconsistent with, and shall be subject to all of the requirements of, the following provisions: (a) Not later than the ninetieth day of each calendar year (or as soon as practicable after the date of the adoption of the Plan, if later), the Committee shall approve (i) a Target Award to be granted to each Participant for such year and (ii) a formula for determining the amount of each Award, which formula is based upon the Company's return on equity for the applicable Award Term. (b) Effective during April of the calendar year following the Award Term, the Committee shall approve: (i) a preliminary calculation of the amount of each Award based upon the application of the formula and actual performance to the Target Awards previously determined in accordance with Section 5(a); and (ii) a final calculation of the amount of each Award to be granted to each Participant for the Award Term, which amount shall be not greater than the amount determined in accordance with Section 5(b)(i) (the "Grant Date" of such Award being January 1st of the calendar year following the Award Term). The Committee shall have the power to decrease, but not to increase, the amount of any Award below the amount determined in accordance with Section 5(b)(i); provided, however, no Award, 4 5 including any Award equal to the Target Award, shall be payable under the Plan to any Participant except as determined by the Committee. For purposes of this calculation, Awards shall be based on the Participant's Hay Salary Grade as of January 1 of the Award Term. (c) In order to be eligible to receive an Award for an Award Term, the Participant must be employed during the entire Award Term or must have died, become disabled or Retired during the Award Term, in which case the Participant shall be entitled to a pro-rata portion of the Award for such Award Term. (d) Each Award shall be granted in the form of Book Value Units. The number of Book Value Units to be issued to a Participant shall be determined by dividing the amount of the Award by the Award Unit Price. Notwithstanding any other provision of the Plan, the maximum cash value of the Awards granted to a Participant under this Plan in a single year shall not exceed $2,250,000. (e) Multiple Awards may be granted to a Participant; provided, however, that no two Awards to a Participant may have identical performance periods 6. VESTING; PAYMENT OF AWARDS (a) VESTING. All Book Value Units granted pursuant to an Award hereunder shall be immediately 100% vested as of the Grant Date. (b) PAYMENT RESTRICTIONS. Each Award shall provide that the Book Value Units granted therein shall be subject to a payment restriction in the manner and to the extent prescribed by the Committee for a period of five years from the Grant Date, or such other shorter or longer period as may be determined by the Committee from time to time. Notwithstanding the foregoing, such payment restrictions shall automatically lapse upon a termination of employment by reason of death, permanent disability or Retirement. In addition, in the case of other special circumstances of a Participant who holds Award Units as to which the payment restrictions have not lapsed, or in case of a termination of the Plan pursuant to Section 8, the Committee may, in its sole discretion, accelerate the time at which such payment restrictions will lapse. (c) PAYMENT DATE/VALUE. Subject to Subsection 6(e) hereof, and unless a Participant makes a deferral election under Subsection (d) of this Section, as soon as practicable following the lapse of a payment restriction applicable to an Award pursuant to Section 6(b), the employer or former employer of 5 6 the Participant shall deliver to the Participant (or, if applicable, his Beneficiary), a check in full payment of the Book Value Units granted pursuant to such Award. For participants who terminated employment (for reasons other than death, permanent disability or Retirement), the value of such Book Value Units shall be based on the Book Value as of the Quarter Date coincident with or immediately preceding the date of termination. For Participants who terminated employment due to death, permanent disability or Retirement, the value of such Book Value Units shall be based on the Book Value as of the Quarter Date coincident with or immediately preceding the date on which the payment restriction lapses. 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 to such governmental authority for the account of the person entitled to such payment. (d) DEFERRAL OPTION. Prior to the date described in Subsection (c), to the extent determined by the Committee in its sole and absolute discretion (and subject to the rules and procedures specified in the Guidelines), a Participant may make an irrevocable election to defer receipt of 100% of the Award granted to him for a particular Award Term for a period not to exceed ten (10) years from the Grant Date of such Award. A separate deferral election may be made with respect to each Award granted under the Plan. The Awards which are subject to such a deferral election shall continue to be subject to the terms and conditions of this Plan and shall continue to be valued in accordance with the terms of the Plan until the date of payment (or further deferral, as described in the following sentence). In addition, a Participant who has made an irrevocable election to defer the receipt of an Award until exactly ten (10) years from the Grant Date of such Award shall be permitted (subject to the Committee's sole and absolute discretion and the rules and procedures contained in the Guidelines) to make another irrevocable election to further defer the receipt of such deferred Award under and into the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (the "Unfunded Plan"). Deferred Awards payable to an active employee under this Plan shall be paid to the Participant as soon as practicable following the payment date previously elected by the Participant and shall be based on the Book Value as of the Quarter Date coincident with or immediately preceding such payment date. Deferred Awards which are further deferred into the Unfunded Plan shall be credited to the Unfunded Plan as soon as practicable following the 10th anniversary of the Grant Date of such Award and shall be based on the Book Value as of the Quarter Date coincident with or immediately preceding such anniversary date. Notwithstanding the foregoing, any deferral election hereunder shall automatically terminate (and shall be of no further effect) upon a Participant's termination of employment with the Company and the Subsidiaries for any reason (including death or disability) and payment of all such deferred Awards shall be made as soon as 6 7 practicable following the date of the Participant's termination of employment, based on the Book Value as of the Quarter Date coincident with or immediately preceding such termination date; provided, however, that any Awards which are subject to a deferral election at the time of a Participant's Retirement shall automatically be deferred under and into the Unfunded Plan as of the date of the Participant's Retirement, with the value of the Book Value Units being based on the Book Value as of the Quarter Date coincident with or immediately preceding such Retirement date if (and only if) the Participant has a currently-effective payment election relating to Awards under the Unfunded Plan and is then eligible to participate in the Unfunded Plan. (e) CODE SECTION 162(m) PAYMENT RESTRICTION. Notwithstanding any provision of the Plan to the contrary, payment of all or any portion of an Award will be deferred to the extent that the amount of such Award, when added to any other compensation received or to be received by a Participant who is, or is determined by the Committee to be likely to become, a "covered employee" (under Section 162(m) of the Code), would not be deductible by the Company or a Subsidiary by reason of Section 162(m) of the Code. The amount to be deferred will equal the amount that otherwise would not be deductible by the Company or the Subsidiary by reason of Section 162(m) of the Code, but in no event greater than the total amount payable hereunder. The deferred amount shall become payable on December 31 of the first succeeding calendar year in which such amount, when added to all other compensation received or to be received by the Participant in such calendar year, would not be non-deductible by the Company or a Subsidiary by reason of Section 162(m) of the Code. The Committee, in its sole and absolute discretion, shall have the authority to waive this payment restriction (in whole or in part) upon the written request of a Participant. 7. ASSIGNABILITY No Award granted to a Participant under this Plan shall be transferable by him for any reason whatsoever; provided, however, that upon the death of a Participant the right to the proceeds of an Award may be transferred to a Beneficiary. 8. AMENDMENT, TERMINATION AND ADJUSTMENTS (a) The Committee, in its sole and absolute discretion, may alter or amend this Plan from time to time; provided, however, that no such amendment shall, without the consent of a Participant, affect the amount of any outstanding Award or any Award Units of such Participant. 7 8 (b) The Committee, in its sole and absolute discretion, may terminate this Plan in its entirety at any time; provided that, except as provided in this Subsection, no such termination shall, without the consent of a Participant, affect the amount of any outstanding Award or any Award Units of such Participant. Except as otherwise provided in an amendment to the Plan, all Target Awards and Awards granted prior to any termination of this Plan shall continue to be subject to the terms of this Plan. Notwithstanding the foregoing, upon a complete termination of the Plan, the Committee, in its sole and absolute discretion, shall have the right to change the time of distribution of Participants' Award Units under the Plan, including requiring that all such Award Units be immediately distributed in the form of lump sum cash payments. (c) Any amendment or termination of the Plan shall be in the form of a written instrument executed by an officer of the Company on the order of the Committee. Such amendment or termination shall become effective as of the date specified in the instrument or, if no such date is specified, on the date of its execution. (d) The Committee may make or provide for an adjustment in the total number of Award Units to be issued under this Plan as the Committee in its sole discretion, exercised in good faith, may determine is equitably required to reflect (i) any stock dividend, stock split, combination of shares, recapitalization or any other change in the capital structure of the Company, (ii) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (iii) any other corporate transaction or event having an effect similar to any of the foregoing. 9. GENERAL PROVISIONS (a) NO RIGHT OF EMPLOYMENT. Neither the adoption or operation of this Plan, nor any document describing or referring to this Plan, or any part thereof, shall confer upon any employee any right to continue in the employ 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 any Subsidiary might have done if this Plan had not been adopted. 8 9 (b) GOVERNING LAW. The provisions of this Plan shall be governed by and construed in accordance with the laws of the State of North Carolina, except when preempted by federal law. (c) LIABILITY FOR PAYMENT/EXPENSES. The employer by which the Participant was last employed prior to the payment date of a particular Award shall be liable for the payment of such Award to or on behalf of such Participant, but such employer's liability shall be limited to its proportionate share of such amount, as hereinafter provided. If the Award(s) payable to or on behalf of a Participant are based on the Participant's employment with more than one employer, the liability for such Awards shall be shared by all such employers (by reimbursement to the employer making such payment(s)) as determined by the Company (taking into consideration the Participant's service and compensation paid by each such employer) and as will permit the deduction (for purposes of federal or foreign income tax) by each such employer of its portion of the payments made and to be made hereunder. Expenses of administering the Plan shall be paid by the Company and the Subsidiaries, as directed by the Company. (d) LIMITATION ON RIGHTS OF PARTICIPANTS; NO TRUST. No trust has been created by the Company or any Subsidiary for the payment of Book Value Units granted under this Plan; nor have the grantees of Book Value 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 Subsidiaries, and the grantees hereunder are unsecured creditors of the Company and the Subsidiaries. (e) PAYMENT TO GUARDIAN. If an Award is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Committee may direct payment of such Award to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Committee may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to the distribution of such Award. Such distribution shall completely discharge the Company and the Subsidiaries from all liability with respect to such Award. (f) MISCELLANEOUS. Headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such headings, numbering and paragraphing shall not in any case be deemed in any way material or relevant to the construction of this Plan or any provisions thereof. The use of the 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. 9 10 10. EFFECTIVE DATE The effective date of this Plan is as of January 1, 2000. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Reginald R. Eklund ------------------------------------- Title: President and CEO Date: October 5, 2000 ---------------------------- 10 EX-10.LXV 12 l87125bex10-lxv.txt EXHIBIT 1O(LXV) 1 Exhibit 10 (lxv) ================================================================================ NACCO MATERIALS HANDLING GROUP, INC. LONG-TERM INCENTIVE COMPENSATION PLAN (EFFECTIVE AS OF JANUARY 1, 2000) ================================================================================ 1. PURPOSE OF THE PLAN The purpose of this January 1, 2000 Long-Term Incentive Compensation Plan (the "Plan") is to further the long-term profits and growth of NACCO Materials Handling Group, Inc. (the "Company") by enabling the Company and its Subsidiaries to attract and retain key management employees by offering long-term incentive compensation to those officers and key management employees who will be in a position to make significant contributions to such profits and 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" shall mean an award of Book Value Units granted to a Participant under this Plan for an Award Year in an amount determined pursuant to a formula which is established by the Committee not later than the 90th calendar day of the Award Year. Notwithstanding the foregoing, for the 2000 Award Year, such formula shall be established by the Committee prior to or as soon as practicable following the adoption of the Plan. (b) "Award Units" shall mean Book Value Units which are issued pursuant to, and with such restrictions as are imposed by, the terms of this Plan. (c) "Award Unit Price" as to any Book Value Unit shall mean the Book Value on the Quarter Date coincident with or immediately preceding the Grant Date of the Award. (d) "Award Year" shall mean the calendar year on which an Award is based. (e) "Beneficiary" shall mean the person(s) designated in writing (on a form acceptable to the Committee) to receive the payment of all or part of an Award hereunder in the event of the death of a Participant. In the absence of such a designation and at anytime when there is no existing Beneficiary hereunder, Participant's Beneficiary shall be his surviving Spouse or, if none, his estate. 2 (f) "Book Value" as to any Book Value 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 on 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 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. (g) "Book Value Unit" or "Unit" shall mean a right granted pursuant to the terms and conditions set forth in Section 5. (h) "Committee" shall mean the Nominating, Organization and Compensation Committee of the Company's Board of Directors or any other committee appointed by the Company's Board of Directors to administer this Plan in accordance with Section 3. (i) "Grant Date" shall mean the effective date of an Award, as determined under Section 5(b)(ii) of the Plan. (j) "Guidelines" shall mean the annual guidelines that are approved by the Committee for the administration of the Awards granted under the Plan. To the extent that there is any inconsistency between the Guidelines and the Plan, the Guidelines shall control. (k) "Hay Salary Grade" shall mean the salary grade or points assigned to a Participant by the Company pursuant to the Hay Salary System, or any successor salary system subsequently adopted by the Company. (l) "Notional Shares" shall mean 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 the Plan, and shall equal 20 million shares on the effective date described in Section 10 hereof. (m) "Participant" shall mean any person who meets the eligibility criteria set forth in Section 4 and who is granted an Award under the Plan. 3 (n) "Quarter Date" shall mean the last business day of each calendar quarter. (o) "Retirement" or "Retire" shall mean the (i) termination of a U.S. Participant's employment with the Company and the Subsidiaries after the Participant has reached age 60 and completed at least 15 years of service, or (ii) termination of a non-U.S. Participant's employment with the Company and the Subsidiaries which qualifies as a retirement under local practices and procedures and/or which qualifies the non-U.S. Participant for foreign retirement benefits. (p) "Subsidiary" shall mean any (i) corporation, partnership or other entity, the majority of the outstanding voting securities of which is owned, directly or indirectly, by the Company or (ii) NMHG Distribution Co. and its subsidiaries. (q) "Target Award" shall mean the dollar value of the Award to be paid to a Participant under the Plan assuming that the performance targets are met. 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 (including, without limitation, the Guidelines), and to make all other determinations necessary or advisable for the administration of this Plan. A majority of the Committee shall constitute a quorum, and the action of members of the Committee present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the act of the Committee. All acts and decisions of the Committee with respect to any questions arising in connection with the administration and interpretation of this Plan, including the severability of any or all of the provisions hereof, shall be conclusive, final and binding upon the Company and all present and former Participants, all other employees of the Company and its Subsidiaries, and their respective descendants, successors and assigns. No member of the Committee shall be liable for any such act or decision made in good faith. 4. ELIGIBILITY Any person who is classified by the Company or a Subsidiary as a salaried employee of the Company or any Subsidiary (including any Subsidiary acquired after adoption of this Plan) generally at a Hay Salary Grade of 25 or above (or a compensation level equivalent thereto), who in the judgment of 4 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 Units. Notwithstanding the foregoing, the following persons shall not be eligible to participate in the Plan: (a) 5 directors of the Company or any Subsidiary who are not classified as salaried employees of the Company or any Subsidiary, (b) leased employees (as such term is defined in Section 414 of the Internal Revenue Code) and (c) salaried employees of the Company or a Subsidiary who are eligible to participate in the NACCO Materials Handling Group, Inc. Senior Executive Long-Term Incentive Compensation Plan. A person who satisfies the requirements of this Section 4 shall become a Participant in the Plan when granted an Award hereunder. 5. GRANTING OF AWARDS The Committee may, from time to time and upon such conditions as it may determine, authorize the granting of Awards to Participants, which shall be not inconsistent with, and shall be subject to all of the requirements of, the following provisions: (a) Not later than the ninetieth day of each Award Year (or as soon as practicable after the date of the adoption of the Plan, if later), the Committee shall approve (i) a Target Award to be granted to each Participant for such Year and (ii) a formula for determining the amount of each Award, which formula is based upon the Company's average return on equity for such Year. (b) Effective during April of the calendar year following the Award Year, the Committee shall approve: (i) a preliminary calculation of the amount of each Award based upon the application of the formula and actual performance to the Target Awards previously determined in accordance with Section 5(a); and (ii) a final calculation of the amount of each Award to be granted to each Participant for the Award Year, which amount shall be not greater than the amount determined in accordance with Section 5(b)(i) (the "Grant Date" of such Award being January 1st of the calendar year following the Award Year). The Committee shall have the power to decrease, but not to increase, the amount of any Award below the amount determined in accordance with Section 5(b)(i); provided, however, no Award, including any Award equal to the Target Award, shall be payable under the Plan to any Participant except as determined by the Committee. For purposes of this calculation, Awards shall be based on the Participant's Hay Salary Grade as of January 1 of the Award Year. (c) In order to be eligible to receive an Award for an Award Year, the Participant must be employed during the entire Award Year or must have died, become disabled or Retired during the Award 6 Year, in which case the Participant shall be entitled to a pro-rata portion of the Award for such Award Year. (d) Each Award shall be granted in the form of Book Value Units. The number of Book Value Units to be issued to a Participant shall be determined by dividing the amount of the Award by the Award Unit Price. Notwithstanding any other provision of the Plan, the maximum cash value of the Awards granted to a Participant under this Plan in a single year shall not exceed $2,250,000. (e) Multiple Awards may be granted to a Participant; provided, however, that no two Awards to a Participant may have identical performance periods 6. VESTING; PAYMENT OF AWARDS (a) VESTING. All Book Value Units granted pursuant to an Award hereunder shall be immediately 100% vested as of the Grant Date. (b) PAYMENT RESTRICTIONS. Each Award shall provide that the Book Value Units granted therein shall be subject to a payment restriction in the manner and to the extent prescribed by the Committee for a period of five years from the Grant Date, or such other shorter or longer period as may be determined by the Committee from time to time. Notwithstanding the foregoing, such payment restrictions shall automatically lapse upon a termination of employment by reason of death, permanent disability or Retirement. In addition, in the case of other special circumstances of a Participant who holds Award Units as to which the payment restrictions have not lapsed, or in case of a termination of the Plan pursuant to Section 8, the Committee may, in its sole discretion, accelerate the time at which such payment restrictions will lapse. (c) PAYMENT DATE/VALUE. Unless a Participant makes a deferral election under Subsection (d) of this Section, as soon as practicable following the lapse of a payment restriction applicable to an Award pursuant to Section 6(b), the employer or former employer of the Participant shall deliver to the Participant (or, if applicable, his Beneficiary), a check in full payment of the Book Value Units granted pursuant to such Award. For participants who terminated employment (for reasons other than death, permanent disability or Retirement), the value of such Book Value Units shall be based on the Book Value as of the Quarter Date coincident with or immediately preceding the date of termination. For Participants who terminated employment due to death, permanent disability or Retirement, the value of such Book Value Units shall be based on the Book Value as of the Quarter Date coincident with or immediately preceding the date on which the payment restriction lapses. There shall be deducted from each payment under the Plan the amount of any tax required by any governmental authority to be 7 withheld and paid over to such governmental authority for the account of the person entitled to such payment. (d) DEFERRAL OPTION. Prior to the date described in Subsection (c), to the extent determined by the Committee in its sole and absolute discretion (and subject to the rules and procedures specified in the Guidelines), a Participant may make an irrevocable election to defer receipt of 100% of the Award granted to him for a particular Award Year for a period not to exceed ten (10) years from the Grant Date of such Award. A separate deferral election may be made with respect to each Award granted under the Plan. The Awards which are subject to such a deferral election shall continue to be subject to the terms and conditions of this Plan and shall continue to be valued in accordance with the terms of the Plan until the date of payment (or further deferral, as described in the following sentence). In addition, a Participant who has made an irrevocable election to defer the receipt of an Award until exactly ten (10) years from the Grant Date of such Award shall be permitted (subject to the Committee's sole and absolute discretion and the rules and procedures contained in the Guidelines) to make another irrevocable election to further defer the receipt of such deferred Award under and into the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (the "Unfunded Plan"). Deferred Awards payable to an active employee under this Plan shall be paid to the Participant as soon as practicable following the payment date previously elected by the Participant and shall be based on the Book Value as of the Quarter Date coincident with or immediately preceding such payment date. Deferred Awards which are further deferred into the Unfunded Plan shall be credited to the Unfunded Plan as soon as practicable following the 10th anniversary of the Grant Date of such Award and shall be based on the Book Value as of the Quarter Date coincident with or immediately preceding such anniversary date. Notwithstanding the foregoing, any deferral election hereunder shall automatically terminate (and shall be of no further effect) upon a Participant's termination of employment with the Company and the Subsidiaries for any reason (including death or disability) and payment of all such deferred Awards shall be made as soon as practicable following the date of the Participant's termination of employment, based on the Book Value as of the Quarter Date coincident with or immediately preceding such termination date; provided, however, that any Awards which are subject to a deferral election at the time of a Participant's Retirement shall automatically be deferred under and into the Unfunded Plan as of the date of the Participant's Retirement, with the value of the Book Value Units being based on the Book Value as of the Quarter Date coincident with or immediately preceding such Retirement date if (and only if) the Participant has a currently-effective payment election relating to Awards under the Unfunded Plan and is then eligible to participate in the Unfunded Plan. 8 7. ASSIGNABILITY No Award granted to a Participant under this Plan shall be transferable by him for any reason whatsoever; provided, however, that upon the death of a Participant the right to the proceeds of an Award may be transferred to a Beneficiary. 8. AMENDMENT, TERMINATION AND ADJUSTMENTS (a) The Committee, in its sole and absolute discretion, may alter or amend this Plan from time to time; provided, however, that no such amendment shall, without the consent of a Participant, affect the amount of any outstanding Award or any Award Units of such Participant. (b) The Committee, in its sole and absolute discretion, may terminate this Plan in its entirety at any time; provided that, except as provided in this Subsection, no such termination shall, without the consent of a Participant, affect the amount of any outstanding Award or any Award Units of such Participant. Except as otherwise provided in an amendment to the Plan, all Target Awards and Awards granted prior to any termination of this Plan shall continue to be subject to the terms of this Plan. Notwithstanding the foregoing, upon a complete termination of the Plan, the Committee, in its sole and absolute discretion, shall have the right to change the time of distribution of Participants' Award Units under the Plan, including requiring that all such Award Units be immediately distributed in the form of lump sum cash payments. (c) Any amendment or termination of the Plan shall be in the form of a written instrument executed by an officer of the Company on the order of the Committee. Such amendment or termination shall become effective as of the date specified in the instrument or, if no such date is specified, on the date of its execution. (d) The Committee may make or provide for an adjustment in the total number of Award Units to be issued under this Plan as the Committee in its sole discretion, exercised in good faith, may determine is equitably required to reflect (i) any stock dividend, stock split, combination of shares, recapitalization or any other change in the capital structure of the Company, (ii) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (iii) any other corporate transaction or event having an effect similar to any of the foregoing. 9 9. GENERAL PROVISIONS (a) NO RIGHT OF EMPLOYMENT. Neither the adoption or operation of this Plan, nor any document describing or referring to this Plan, or any part thereof, shall confer upon any employee any right to continue in the employ 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 any Subsidiary might have done if this Plan had not been adopted. (b) GOVERNING LAW. The provisions of this Plan shall be governed by and construed in accordance with the laws of the State of North Carolina, except when preempted by federal law. (c) LIABILITY FOR PAYMENT/EXPENSES. The employer by which the Participant was last employed prior to the payment date of a particular Award shall be liable for the payment of such Award to or on behalf of such Participant, but such employer's liability shall be limited to its proportionate share of such amount, as hereinafter provided. If the Award(s) payable to or on behalf of a Participant are based on the Participant's employment with more than one employer, the liability for such Awards shall be shared by all such employers (by reimbursement to the employer making such payment(s)) as determined by the Company (taking into consideration the Participant's service and compensation paid by each such employer) and as will permit the deduction (for purposes of federal or foreign income tax) by each such employer of its portion of the payments made and to be made hereunder. Expenses of administering the Plan shall be paid by the Company and the Subsidiaries, as directed by the Company. (d) LIMITATION ON RIGHTS OF PARTICIPANTS; NO TRUST. No trust has been created by the Company or any Subsidiary for the payment of Book Value Units granted under this Plan; nor have the grantees of Book Value 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 Subsidiaries, and the grantees hereunder are unsecured creditors of the Company and the Subsidiaries. (e) PAYMENT TO GUARDIAN. If an Award is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Committee may direct payment of such Award to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Committee may require such proof of incompetency, minority, incapacity or 10 guardianship as it may deem appropriate prior to the distribution of such Award. Such distribution shall completely discharge the Company and the Subsidiaries from all liability with respect to such Award. (f) MISCELLANEOUS. Headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such headings, numbering and paragraphing shall not in any case be deemed in any way material or relevant to the construction of this Plan or any provisions thereof. The use of the 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, 2000. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Reginald R. Eklund ------------------------------------ Title: President and CEO ---------------------------- Date: July 6, 2000 ----------------------- EX-10.LXXIII 13 l87125bex10-lxxiii.txt EXHIBIT 10(LXXIII) 1 Exhibit 10(lxxiii) THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 2000) 2 2 NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN NACCO Materials Handling Group, Inc. (the "Company") does hereby amend and completely restate the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan on the terms and conditions described hereinafter, effective September 1, 2000: ARTICLE I PREFACE ------- SECTION 1.1 EFFECTIVE DATE. The original effective date of this Plan was February 10, 1993. The effective date of this amendment and restatement is September 1, 2000. SECTION 1.2 PURPOSE OF THE PLAN. The purpose of this Plan is (a) to allow certain employees to defer the receipt of Compensation or the receipt of certain long-term incentive compensation award payments, (b) to provide for certain Employees the benefits they would have received under the Qualified Plans but for (i) the dollar limitation on Compensation taken into account under the Qualified Plans as a result of Section 401(a)(17) of the Code, (ii) the limitations imposed under Section 415 of the Code, and (iii) the limitations under Sections 402(g), 401(k)(3) and 401(m) of the Code, and (c) to provide for the continued deferral of certain frozen benefits. SECTION 1.3 GOVERNING LAW. This Plan shall be regulated, construed and administered under the laws of the State of North Carolina, except when preempted by federal law. SECTION 1.4 GENDER AND NUMBER. For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural unless otherwise clearly required by the context. ARTICLE II DEFINITIONS ----------- Except as otherwise provided in this Plan, terms defined in the Profit Sharing Plan as it may be amended from time to time shall have the same meanings when used herein, unless a different meaning is clearly required by the context of this Plan. In addition, the following words and phrases shall have the following respective meanings for purposes of this Plan. 3 3 SECTION 2.1 ACCOUNT shall mean the record maintained by the Employer in accordance with Section 4.1 as the sum of the Participant's Excess Profit Sharing Sub-Account, Excess 401(k) Sub-Account, Excess Matching Sub-Account, Excess Deferral Sub-Account, LTIP Deferral Sub-Account and Yale Short-Term Deferral Sub-Account. SECTION 2.2 ADJUSTED ROE. (a) For purposes of this Section, the following terms shall have the following meanings: (i) "NET INCOME (BEFORE EXTRAORDINARY ITEMS)" is defined as consolidated net income, as defined by generally accepted accounting principles ("GAAP"), for the Company and its subsidiaries for the subject year before extraordinary items, but including any extraordinary items related to refinancings (net of tax); (ii) "AMORTIZATION OF GOODWILL" is defined as the consolidated amortization expense related to the intangible asset goodwill for the Company for the subject year; (iii) "WEIGHTED AVERAGE STOCKHOLDERS' EQUITY" is calculated by adding the consolidated stockholders' equity for the Company 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 consolidated 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; and (b) "Adjusted ROE" shall mean the average return on equity of the Company calculated for the applicable time period, based on A divided by B, where: A = Net Income (before extraordinary items) + Amortization of Goodwill; and B = Weighted Average (Stockholders' Equity + Accumulated Amortization of Goodwill). (c) Adjusted ROE shall be determined at least annually by the Company 4 4 SECTION 2.3 BENEFICIARY shall mean the person or persons designated by the Participant as his Beneficiary under this Plan, in accordance with the provisions of Article VIII hereof. SECTION 2.4 COMPANY shall mean NACCO Materials Handling Group, Inc. or any entity that succeeds NACCO Materials Handling Group, Inc. by merger, reorganization or otherwise. SECTION 2.5 COMPENSATION shall have the same meaning as under the Profit Sharing Plan, except that (a) Compensation shall be deemed to include (i) the amount of compensation deferred by the Participant under this Plan, excluding, however, LTIP Deferral Benefits and (ii) amounts in excess of the limitation imposed by Code Section 401(a)(17) and (b) Compensation shall be deemed to exclude cash compensation which is paid for special perquisites, such as country club dues and company plane allowances. Notwithstanding the foregoing, cash allowances in lieu of general perquisites that are paid to substantially all Participants shall be included in the definition of Compensation hereunder. SECTION 2.6 EMPLOYER shall mean the Company, NACCO Industries, Inc., NACCO Materials Handling Group, Ltd., NACCO Materials Handling, B.V. NACCO Materials Handling, S.r.l., NMHG Mexico, S.A. de C.V. and NACCO Materials Handling Group Brasil Ltda. SECTION 2.7 EXCESS RETIREMENT BENEFIT OR BENEFIT shall mean an LTIP Deferral Benefit, Yale Short-Term Deferral Benefit, Excess Profit Sharing Benefit, Excess 401(k) Benefit, Excess Matching Benefit or Excess Deferral Benefit (as described in Article III) which is payable to or with respect to a Participant under this Plan. SECTION 2.8 FIXED INCOME FUND shall mean the Stable Asset Fund under the Profit Sharing Plan or any equivalent fixed income fund thereunder which is designated by the NACCO Industries, Inc. Retirement Funds Investment Committee as the successor to the Stable Asset Fund. SECTION 2.9 401(k) EMPLOYEE shall mean an Employee of an Employer who is a Participant in the Profit Sharing Plan who is eligible to receive Before-Tax Contributions and Matching Employer Contributions thereunder. SECTION 2.10 INSOLVENT. For purposes of this Plan, an Employer shall be considered Insolvent at such time as it (a) is unable to pay its debts as they mature, or (b) is subject to a 5 5 pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code (or similar foreign law). SECTION 2.11 LTIP PLAN shall mean the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan (Effective January 1, 1990) or the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan (Effective January 1, 2000), or any successor thereto. SECTION 2.12 PARTICIPANT. (a) For purposes of Section 3.1 of the Plan, the term "Participant" means an Employee who is a Participant in the profit sharing portion of the Profit Sharing Plan (i) whose profit sharing benefit for a Plan Year is limited by the application of Section 401(a)(17) or 415 of the Code and (ii) whose total annual compensation from the Controlled Group for such Plan Year was at least $100,000. (b) For purposes of Section 3.2 of the Plan, the term "Participant" means (i) any Employee of the Company who made Excess Deferrals under the Plan prior to January 1, 1996 and (ii) any Employee of the Company whose total annual Compensation from the Controlled Group for the Plan Year in which a deferral election is required was at least $100,000, who is listed on Exhibit A hereto and who is eligible to make Excess Deferrals on or after January 1, 2000. (c) For purposes of Sections 3.3 and 3.4 of the Plan, the term "Participant" means a 401(k) Employee (i) who is unable to make all of the Before-Tax Contributions that he has elected to make to the Profit Sharing Plan, or is unable to receive the maximum amount of Matching Employer Contributions under the Profit Sharing Plan because of the limitations of Section 402(g), 401(a)(17), 401(k)(3), or 401(m) of the Code, and (ii) whose total annual compensation from the Controlled Group for the Plan Year in which a deferral election is required is at least $100,000. (d) For purposes of Section 3.5 of the Plan, the term "Participant" means an Employee (i) who is a participant in the LTIP Plan, (ii) who, both at the time the deferral election is required and at the time the deferral becomes effective, is either a U.S. citizen, a nonresident alien who is covered on a U.S. payroll or a citizen or resident of the United Kingdom (referred to herein as the "UK Participants"), Brazil, Italy or Mexico and (iii) whose total annual Compensation from the Controlled Group for the Plan Year in which a deferral election 6 6 is required was at least $100,000 (U.S.). In addition, the Employee must either be an active Employee at the time the deferral becomes effective or must have "Retired" as such term is defined in the LTIP Plan. (e) For purposes of Section 3.6 of the Plan, the term "Participant" means any person who was entitled to receive benefits under the Yale Short-Term Plan on August 31, 1999. (f) The term "Participant" shall also include any other person who, as of August 31, was entitled to receive an Excess Retirement Benefit under the Plan. SECTION 2.13 PLAN shall mean the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan, as herein set forth or as duly amended. SECTION 2.14 PLAN ADMINISTRATOR shall mean the Company. SECTION 2.15 PLAN YEAR shall mean the calendar year. SECTION 2.16 PRIOR PLAN shall mean the Yale Materials Handling Corporation Unfunded Deferred Compensation Plan. SECTION 2.17 PROFIT SHARING EMPLOYEE shall mean an Employee of an Employer who is a participant in the Profit Sharing Plan and who is eligible for Profit Sharing Contributions. SECTION 2.18 PROFIT SHARING PLAN shall mean the NACCO Materials Handling Group, Inc. Profit Sharing Plan or any successor thereto. SECTION 2.19 UNFORESEEABLE EMERGENCY shall mean an event which results (or will result) in severe financial hardship to the Participant as a consequence of an unexpected illness or accident or loss of the Participant's property due to casualty or other similar extraordinary or unforeseen circumstances out of the control of the Participant. SECTION 2.20 VALUATION DATE shall mean the last day of each Plan Year and any other date chosen by the Plan Administrator. SECTION 2.21 YALE SHORT-TERM PLAN shall mean the Yale Materials Handling Corporation Short-Term Incentive Compensation Deferral Plan, a plan that was frozen prior to 1992. The Yale 7 7 Short-Term Plan was merged into the Plan effective August 31, 1999. ARTICLE III EXCESS RETIREMENT BENEFITS -------------------------- SECTION 3.1 EXCESS PROFIT SHARING BENEFITS. (a) IN GENERAL. Each Employer shall credit to a Sub-Account (the "Excess Profit Sharing Sub-Account") established for each Participant who is both an Employee of such Employer and a Profit Sharing Employee, an amount equal to the excess, if any, of (i) the amount of the Employer's Profit Sharing Contribution which would have been made to the profit sharing portion of the Profit Sharing Plan on behalf of the Participant if (1) such Plan did not contain the limitations imposed under Sections 401(a)(17) and 415 of the Code and (2) the term "Compensation" (as defined in Section 2.5 hereof) were used for purposes of determining the amount of profit sharing contributions under the Profit Sharing Plan, OVER (ii) the amount of the Employer's Profit Sharing Contribution which is actually made to such Plan on behalf of the Participant for such Plan Year (the "Excess Profit Sharing Benefits"). (b) MINIMUM BENEFIT. Notwithstanding the foregoing, the Excess Profit Sharing Sub-Account balance of a Participant who was a participant in the Prior Plan shall in no event be less than the amount credited to such Participant's account under the Prior Plan as of February 10, 1993. SECTION 3.2 BASIC AND ADDITIONAL EXCESS DEFERRAL BENEFITS. (a) PRE-1996 EXCESS DEFERRAL BENEFITS. Prior to January 1, 1996, certain Employees of the Company were permitted to elect to defer specified amounts of salary and bonus of up to 7% of compensation (the "Basic Excess Deferrals") which are credited to the Basic Excess Deferral Sub-Account hereunder and in excess of 7% of compensation (the "Additional Excess Deferrals") which are credited to the Additional Excess Deferral Sub-Account hereunder. (b) POST-1999 EXCESS DEFERRAL BENEFITS. Each Participant described in Section 2.14(c)(ii) may, prior to the first day of any Plan Year, by completing an approved deferral election form, direct the Company to reduce his Compensation for such Plan Year by an amount equal to between 1% and 17% of his Compensation for the Plan Year (in 1% increments). The first 7% 8 8 of Compensation deferred by a Participant will be classified as the Basic Excess Deferrals which are credited to the Basic Excess Deferrals Sub-Account and Compensation deferred in excess of 7% of Compensation will be classified as the Additional Excess Deferrals and will be credited to the Additional Excess Deferral Sub-Account. SECTION 3.3 BASIC AND ADDITIONAL EXCESS 401(k) BENEFITS. (a) AMOUNT OF EXCESS 401(k) BENEFITS. Each 401(k) Employee who is a Participant, may, prior to the first day of any Plan Year, by completing an approved deferral election form, direct his Employer to reduce his Compensation for such Plan Year by an amount equal to the difference between (i) a specified percentage, in 1% increments, with a maximum of 17%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions actually permitted to be contributed for him to the Profit Sharing Plan for such Plan Year by reason of the application of the limitations under Sections 402(g), 401(a)(17), and 401(k)(3) of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits"). (b) CLASSIFICATION OF EXCESS 401(k) BENEFITS. The Excess 401(k) Benefits for a particular Plan Year shall be calculated monthly and shall be further divided into the "Basic Excess 401(k) Benefits" and the "Additional Excess 401(k) Benefits" as follows: (i) The Basic Excess 401(k) Benefits shall be determined by multiplying each Excess 401(k) Benefit by a fraction, the numerator of which is the lesser of the percentage of Compensation elected to be deferred in the 401(k) Deferral Election Form for such Plan Year or 7% and the denominator of which is the percentage of Compensation elected to be deferred; and (ii) The Additional Excess 401(k) Benefits (if any) shall be determined by multiplying each Excess 401(k) Benefit by a fraction, the numerator of which is the difference between (1) the percentage of Compensation elected to be deferred in the 401(k) Deferral Election Form for such Plan Year and (2) 7%, and the denominator of which is the percentage of Compensation elected to be deferred. The Basic Excess 401(k) Benefits shall be credited to the Basic Excess 401(k) Sub-Account under this Plan and the Additional 9 Excess 401(k) Benefits shall be credited to the Additional Excess 401(k) Sub-Account hereunder. SECTION 3.4 EXCESS MATCHING BENEFITS. A 401(k) Employee who is a Participant shall have credited to his Basic or Additional Excess Matching Sub-Account (as applicable) an amount equal to the Matching Employer Contributions attributable to the Basic or Additional Excess 401(k) Benefits that he is prevented from receiving under the Profit Sharing Plan because of the limitations of Code Sections 402(g), 401(a)(17), 401(k)(3) and 401(m) of the Code (the "Excess Matching Benefits"). SECTION 3.5 LTIP DEFERRAL BENEFITS. (a) Each Participant (as defined in Section 2.12(d)) may, with the consent of the Company, by completing an approved deferral election form, direct his Employer: (i) to reduce an "Award" (as that term is defined in the LTIP Plan) which has been deferred until the tenth anniversary of the "Grant Date" of such Award (as defined in the LTIP Plan)and thereby extinguish his entitlement under the LTIP Plan to 100% of such deferred Award; and (ii) to credit the amount of the reduction (the "LTIP Deferral Benefits") to the LTIP Deferral Sub-Account hereunder. Such election must be made no later than one-year prior to the date such Award would otherwise be payable to the Participant under the LTIP Plan or(six months prior to Retirement, if later)or at such other time as approved by the Company, in its sole and absolute discretion. (a) In addition, certain Awards which were deferred under the LTIP Plan will automatically be transferred to this Plan in the case of a Participant's "Retirement" (as defined in the LTIP Plan) in which case such Awards will also be credited to the Participant's LTIP Deferral Sub-Account hereunder. SECTION 3.6 YALE SHORT-TERM DEFERRAL BENEFITS. Prior to 1992, certain Employees of a corporate predecessor to the Company were permitted to elect to defer specified amounts of their short-term incentive compensation under the Yale Short-Term Plan. Effective August 31, 1999, the Yale Short-Term Plan was merged into the Plan and amounts credited under the Yale Short-Term Plan were credited to the "Yale Short-Term Deferral Sub-Account" hereunder. 10 10 SECTION 3.7 RULES RELATING TO DEFERRAL ELECTIONS. (a) DEFERRAL PERIOD. (i) GENERAL RULE. The initial deferral elections made by a Participant under Sections 3.2, 3.3 and 3.5 above shall also contain such Participant's irrevocable election regarding the time of the commencement of payment of the Participant's entire Excess Deferral Sub-Account, Excess 401(k) Sub-Account and LTIP Deferral Sub-Account hereunder. The Participant may elect to commence payment of each such Sub-Account (with separate elections being made for each such Sub-Account) as soon as practicable following (A) the date on which he ceases to be an Employee of the Controlled Group, (B) the date on which he attains an age specified in the deferral form, or (C) the earlier or later of such dates. Payment of the Participant's Excess Matching Sub-Account shall be made at the same time as the payment of the Participant's Excess 401(k) Sub-Account. A Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his Excess Deferral, Excess 401(k), Excess Matching and LTIP Deferral Sub-Accounts as soon as practicable following the date on which the Participant ceases to be an Employee of the Controlled Group. (ii) SPECIAL ONE-TIME ELECTION. Notwithstanding the foregoing, due to administrative errors on the part of the Company, Participants who are actively employed on a date to be specified by the Company (which shall be after September 1, 2000 and prior to December 31,2000)shall be given a one-time irrevocable election to determine the payment date of their Excess Deferral Sub-Account, Excess 401(k) Sub-Account(and corresponding Excess Matching Sub-Account) and LTIP Deferral Sub-Account by filing a written election with the Plan Administrator during a 45-day election period specified by the Company. Such an election shall supersede any prior election. A Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his Excess Deferral, Excess 401(k), Excess Matching and LTIP Deferral Sub-Accounts as soon as practicable following the date on which the Participant ceases to be an Employee of the Controlled Group. 11 11 (b) EFFECT OF DEFERRAL ELECTIONS. (i) Any direction by a Participant to defer Compensation under Sections 3.2 or 3.3 shall be effective with respect to Compensation otherwise payable to the Participant for the Plan Year for which the deferral election form is effective and the Participant shall not be eligible to receive such Compensation. Instead, such amounts shall be credited to the Participant's Excess Deferral or Excess 401(k) Sub-Account hereunder (as applicable). Any such direction shall be irrevocable with respect to Compensation earned for such Plan Year, but shall have no effect on Compensation earned in subsequent Plan Years. A new deferral election will be required for each Plan Year under the Plan. (ii) While separate deferral elections may be entered into with respect to each Award payable under the LTIP Plan, any direction by a Participant to defer receipt of a specific Award and to receive LTIP Deferral Benefits in lieu thereof shall be irrevocable with respect to that Award. (c) AUTOMATIC TERMINATION OF DEFERRAL ELECTIONS. (i) Except to the extent specifically provided in the LTIP Plan to the contrary, a Participant's direction to defer Compensation under Section 3.2 or 3.3, or to defer an Award under the LTIP Plan under Section 3.5, shall automatically terminate on the earlier of the date on which (A) the Participant ceases employment with the Controlled Group, (B) the Participant ceases to satisfy the applicable requirements of Section 2.12, (3) the Participant's Employer is deemed Insolvent or (4) the Plan is terminated. (ii) The Plan Administrator may, in its sole and absolute discretion, pursuant to nondiscriminatory rules adopted by the Plan Administrator, reduce and/or cease the deferral of Compensation and/or LTIP Deferral Benefits being made by one or more Participants, to the extent deemed necessary or desirable in order to satisfy the requirements of any applicable law (including, without limitation, federal securities laws). 12 12 (iii) Any Participant whose eligibility to make Before-Tax Contributions to the Profit Sharing Plan has been suspended because he has taken a Hardship withdrawal from such plan shall not be eligible to defer Excess 401(k) Benefits under this Plan for his period of suspension from the Profit Sharing Plan. ARTICLE IV ACCOUNTS -------- SECTION 4.1 PARTICIPANTS' ACCOUNTS. Each Employer shall establish and maintain on its books an Account for each Participant which shall contain the following entries: (a) Credits to an Excess Profit Sharing Sub-Account for the Excess Profit Sharing Benefits described in Section 3.1, which shall be credited to the Sub-Account at the time the Profit Sharing Contributions are otherwise credited to Participants' accounts under the Profit Sharing Plan. (b) Credits to a Basic or Additional Excess Deferral Sub-Account for the Basic and Additional Excess Deferrals described in Section 3.2 which shall be credited to the Sub-Account as soon as practicable after the time Compensation would otherwise have been paid to the Participant. (c) Credits to a Basic or Additional Excess 401(k) Sub-Account for the Basic and Additional Excess 401(k) Benefits described in Section 3.3, which shall be credited to the Sub-Account when a 401(k) Employee is prevented from making a Before-Tax Contribution under the Profit Sharing Plan. (d) Credits to a Basic or Additional Excess Matching Sub-Account for the Basic and Additional Excess Matching Benefits described in Section 3.4, which amounts shall be credited to the Sub-Account when a 401(k) Employee is prevented from receiving Matching Employer Contributions under the Profit Sharing Plan. (e) Credits to an LTIP Deferral Sub-Account for the LTIP Deferral Benefits described in Section 3.5, which shall be credited to the Sub-Account as soon as practicable following the time the Award would otherwise be payable to the Participant under the LTIP Plan. 13 13 (f) Credits to a Yale Short-Term Deferral Sub-Account for the Yale Short-Term Deferral Benefits described in Section 3.6. (g) Credits to all Sub-Accounts for the earnings described in Article V, which shall continue until the such Sub-Accounts have been distributed to the Participant or his Beneficiary. (h) Debits for any distributions made from the Sub-Accounts and any amounts forfeited under Section 7.1(f). SECTION 4.2 EFFECT ON OTHER BENEFITS. Benefits payable to or with respect to a Participant under the Profit Sharing Plan or any other Employer sponsored (qualified or nonqualified) plan, if any, are in addition to those provided under this Plan. ARTICLE V EARNINGS -------- SECTION 5.1 EARNINGS ON BASIC SUB-ACCOUNTS AND PROFIT SHARING SUB-ACCOUNTS. (a) Subject to Subsection (b) and Section 5.4, at the end of each calendar month during a Plan Year, the Excess Profit Sharing Sub-Account, Basic Excess Deferral Sub-Account, Basic Excess 401(k) Sub-Account and Basic Excess Matching Sub-Account of each Participant shall be credited with an amount determined by multiplying such Participant's average Sub-Account balance during such month by the blended rate earned during such month by the Fixed Income Fund. Notwithstanding the foregoing, in the event that the Adjusted ROE determined for such Plan Year that is applicable to the Participant exceeds the rate credited to the Sub-Accounts under the preceding sentence, such Sub-Accounts shall retroactively be credited with the difference between (i) the amount determined under the preceding sentence, and (ii) the amount determined by multiplying the Participant's average Sub-Account balance during each month of such Plan Year by the Adjusted ROE determined for such Plan Year, compounded monthly. (b) The Adjusted ROE calculation described in Subsection (a) shall be made during the month in which the Participant terminates employment and shall be based on the year-to-date Adjusted ROE for the month ending prior to the date the Participant terminated employment, as calculated by the Participant's Employer. For any subsequent month following termination, such Adjusted ROE calculation shall not apply. The Fixed Income Fund calculation described above for the month in 14 14 which the Participant receives a distribution from his Sub-Account shall be based on the blended rate earned during the preceding month by the Fixed Income Fund. SECTION 5.2 EARNINGS ON ADDITIONAL SUB-ACCOUNTS AND THE YALE SHORT-TERM SUB-ACCOUNT. Subject to Section 5.4, at the end of each calendar month during the Plan Year, the Additional Excess Deferral Sub-Account, Additional Excess 401(k) Sub-Account, Additional Excess Matching Sub-Account and Yale Short-Term Deferral Sub Account of each Participant shall be credited with an amount determined by multiplying such Participant's average Sub-Account balance during such month by the blended rate earned during such month by the Fixed Income Fund. The earnings calculation for the month in which the Participant receives a distribution from his Sub-Account shall be based on the blended rate earned during the preceding month by the Fixed Income Fund. SECTION 5.3 EARNINGS ON LTIP DEFERRAL SUB-ACCOUNTS. Subject to Section 5.4, at the end of each calendar month during a Plan Year, the LTIP Deferral Sub-Account of each Participant shall be credited with an amount determined by multiplying such Participant's average Sub-Account balance during such month by the "10-Year U.S. Treasury Yield" plus 2.0%. For purposes hereof, the 10-Year U.S. Treasury Yield shall be the 10 year yield on U.S. Treasury issues as listed in the Bond Market Data Bank for the last day of the preceding calendar quarter as printed in the Wall Street Journal. In the event that a yield is not listed for a maturity exactly 10 years from the calendar quarter end, the next preceding chronological treasury bond issue yield shall be used. SECTION 5.4 CHANGES IN/LIMITATIONS ON EARNINGS ASSUMPTION. (a) The NACCO Industries, Inc. Benefits Committee (the "Committee") may change (but not suspend) the earnings rate credited on Accounts under the Plan at any time upon at least 30 days advance notice to Participants. (b) Notwithstanding any provision of the Plan to the contrary, in no event will earnings on Accounts for a Plan Year be credited at a rate which exceeds 14%. 15 15 ARTICLE VI VESTING ------- SECTION 6.1 VESTING. A Participant shall always be 100% vested in all amounts credited to his Account hereunder. Notwithstanding the foregoing, while Participants are always 100% vested in the amounts credited to their LTIP Deferral Sub-Accounts, this does not give rise to any right or entitlement (whether legal, equitable or otherwise) to payment or distribution otherwise than in accordance with Article VII or Article VIII of the Plan. ARTICLE VII DISTRIBUTION OF BENEFITS TO PARTICIPANTS ---------------------------------------- SECTION 7.1 TIME AND MANNER OF PAYMENT. (a) EXCESS PROFIT SHARING BENEFITS. The Excess Profit Sharing Benefit payable to a Participant shall be paid in the form of a single lump sum payment as soon as practicable following the later of (i) his termination of employment with the Controlled Group or (ii) the date on which all amounts allocable to the Participant's Excess Profit Sharing Sub-Account for the year of such termination have been credited to such Sub-Account. (b) EXCESS DEFERRAL SUB-ACCOUNT, EXCESS 401(K) SUB-ACCOUNT, EXCESS MATCHING SUB-ACCOUNT AND LTIP DEFERRAL SUB-ACCOUNT. (i) TIMING. Each of the Sub-Accounts named in this Subsection (b)shall be paid (or commence to be paid) to the Participant at the time specified in the deferral election form applicable to such Sub-Account (as provided in Section 3.7). (ii) NORMAL FORM OF PAYMENT. Each such Sub-Account shall be distributed to the Participant in the form of ten annual installments. All installment payments under the Plan shall be based on the value of the particular Sub-Account on the Valuation Date immediately preceding the date such installment is to be paid, with each installment being a fraction of such value in which the numerator is one and the denominator is the total number of remaining installments to be paid. The first installment payment shall be paid as soon as practicable after the designated payment date, with each additional 16 16 installment being paid in the month of January of each succeeding calendar year. (iii) OPTIONAL FORMS OF PAYMENT. Notwithstanding the foregoing, the Participant may elect to receive the amount credited to a particular Sub-Account in the form of a single lump sum payment or in annual installments for a period of less than 10 years by filing a notice in writing, signed by the Participant and filed with the Plan Administrator while the Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. Any such election of the form of benefit may be changed at any time and from time to time, without the consent of any other person, by filing a later election in writing that is signed by the Participant and filed with the Plan Administrator while the Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. Any such lump sum payment shall be paid as soon as practicable following the later of (A) the designated payment date or (B) the date on which all amounts allocable to the particular Sub-Account for the year of such termination have been credited to the such Sub-Account. (c) YALE SHORT-TERM DEFERRAL SUB-ACCOUNT. The Yale Short-Term Deferral Sub-Account shall commence to be paid to the Participant (i) in the form of five annual installments with each installment being based on the value of the Yale Short-Term Deferral Sub-Account on the Valuation Date preceding the date on which such installment is to be paid and being a fraction of such value in which the numerator is one and the denominator is the total number of remaining installments to be paid, and (ii) commencing in the January following the date on which the Participant ceases to be an Employee of the Controlled Group. Subsequent installment payments shall be paid in each succeeding January. (d) UNFORESEEABLE EMERGENCY DISTRIBUTIONS. Notwithstanding the foregoing, an Employer may at any time, upon written request of the Participant, cause to be paid to such Participant an amount equal to all or any part of the Participant's Excess Deferral Sub-Account and/or Excess 401(k)Sub-Account and/or Excess Matching Sub-Account if the Employer determines, in its absolute discretion based on such reasonable evidence that it shall require, that such a payment 17 17 or payments is necessary for the purpose of alleviating the consequences of an Unforeseeable Emergency occurring with respect to the Participant. Payments of amounts because of an Unforeseeable Emergency shall be permitted only to the extent reasonably necessary to satisfy the emergency need. Unforeseeable Emergency distributions shall be paid to the Participant in the form of a lump sum payment as soon as practicable after such distribution request is approved and processed by the Employer. (e) SMALL ACCOUNTS. Notwithstanding the foregoing payment provisions: (i) In the event that a Participant's total Account balance does not exceed $50,000 on the date of the Participant's termination of employment with the Controlled Group, such Account shall automatically be paid to him in a single lump sum payment as soon as practicable following the later of (A) the date of his termination of employment with the Controlled Group or (B) the date on which all amounts allocable to the Participant's Account for the year of such termination have been credited to his Account. (ii) In no event will any installment payment under the Plan be less than $10,000 and this $10,000 minimum installment payment shall override and supercede any form of payment election made by a Participant. In the event that any elected installment payment would be less than $10,000, a Participant shall automatically receive an installment payment equal to the lesser of $10,000 or the balance of the particular Sub-Account. Such $10,000 installment payments shall continue in effect until the Sub-Account balance is exhausted. (iii) These minimum payment provisions shall also apply to any Account which is in pay status on September 1, 2000. (f) WITHDRAWALS SUBJECT TO 10% PENALTY. (i) The provisions of this Subsection shall apply notwithstanding any other provision of the Plan to the contrary; provided, however, that the provisions of this Subsection shall not apply to the UK Participants. 18 18 (ii) A Participant who is an Employee may, at any time (and from time to time) elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Additional Excess Deferral Sub-Account; (B) the Additional Excess 401(k) Sub-Account; (C) the Additional Excess Matching Sub-Account; (D) the Yale Short-Term Deferral Sub-Account; and (E) the LTIP Deferral Sub-Account. (iii) In addition to the amounts described in (ii) above, Participants who have previously elected to delay commencement of the payment of such Sub-Accounts and who ceased to be Employees of the Controlled Group may also elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Basic Excess Deferral Sub-Account; (B) the Basic Excess 401(k) Sub-Account; and (C) the Basic Excess Matching Sub-Account. (iv) Withdrawals under this Subsection (f) shall be equal to value of the Sub-Account as of the Valuation Date preceding the payment date, less 10%, and shall be paid to the Participant in the form of a lump sum payment as soon as practicable after such withdrawal request is processed by the Employer. Such 10% reduction shall be treated as a forfeiture hereunder and shall immediately be subtracted from the applicable Sub-Account, never to be restored. (g) PAYMENT RESTRICTION. Notwithstanding any provision of the Plan to the contrary , the payment of all or any portion of the amounts payable hereunder will be deferred to the extent that any amount payable, when added to any other compensation received or to be received by the Participant in the same calendar year, would not be deductible by the Employer by reason of Section 162(m) of the Code. The amount to be deferred will equal the amount that otherwise would not be deductible by the Employer by reason of Section 162(m) of the Code, but in no event greater than the total amount otherwise payable hereunder. The deferred amount shall become payable on December 31 of the first succeeding calendar year in which such amount, when added to all other compensation received or to be received by the Participant in such calendar year, would not be non-deductible by the Employer by reason of Section 162(m)of the 19 19 Code. The Nominating Organization and Compensation Committee of the Board of Directors of the Company, in its sole and absolute discretion, shall have the authority to waive this payment restriction (in whole or in part) upon the written request of the Participant. SECTION 7.2 LIABILITY FOR PAYMENT/EXPENSES. Each Employer shall be liable for the payment of the Excess Retirement Benefits which are payable hereunder to its Employees. Expenses of administering the Plan shall be paid by the Employers, as directed by the Company. ARTICLE VIII BENEFICIARIES ------------- SECTION 8.1 BENEFICIARY DESIGNATIONS. A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable to the Plan Administrator) signed by the Participant and filed with the Plan Administrator prior to the Participant's death. Separate Beneficiary designations may be made for each Benefit under the Plan. In the absence of such a designation and at any other time when there is no existing Beneficiary designated hereunder, (a) the Beneficiary of a Participant for his Excess 401(k) Benefits, his Excess Matching Benefits and his Excess Profit Sharing Benefits shall be his beneficiary under the Profit Sharing Plan, and (b) the Beneficiary of a Participant for his Excess Deferral Benefits, his LTIP Deferral Benefits and his Yale Short-Term Benefits shall be his surviving spouse or, if none, his estate. A person designated by a Participant as his Beneficiary who or which ceases to exist shall not be entitled to any part of any payment thereafter to be made to the Participant's Beneficiary unless the Participant's designation specifically provided to the contrary. If two or more persons designated as a Participant's Beneficiary are in existence with respect to a single Sub-Account, the amount of any payment to the Beneficiary under this Plan shall be divided equally among such persons unless the Participant's designation specifically provides for a different allocation. SECTION 8.2 CHANGE IN BENEFICIARY. (a) Anything herein or in the Profit Sharing Plan to the contrary notwithstanding, a Participant may, at any time and from time to time, change a Beneficiary designation hereunder without the consent of any existing Beneficiary or any other person. A change in Beneficiary hereunder may be made regardless of whether such a change is also made under the Profit Sharing Plan. In other 20 20 words, the Beneficiary hereunder need not be the same as under the Profit Sharing Plan. (a) Any change in Beneficiary shall be made by giving written notice thereof to the Employer or Plan Administrator and any change shall be effective only if received prior to the death of the Participant. SECTION 8.3 DISTRIBUTIONS TO BENEFICIARIES. (a) AMOUNT OF BENEFITS. Excess Retirement Benefits payable to a Participant's Beneficiary under this Plan shall be equal to the balance in the applicable Sub-Account of such Participant on the Valuation Date preceding the date of the distribution of the Sub-Account to the Beneficiary. (b) TIME OF PAYMENT. Excess Retirement Benefits payable to a Beneficiary under this Plan shall be paid as soon as practicable following the death of the Participant. (c) FORM OF PAYMENT. All Benefits payable to a Beneficiary hereunder shall be paid in the form of a lump sum payment. ARTICLE IX MISCELLANEOUS ------------- SECTION 9.1 LIABILITY OF EMPLOYERS. Nothing in this Plan shall constitute the creation of a trust or other fiduciary relationship between an Employer and any Participant, Beneficiary or any other person. SECTION 9.2 LIMITATION ON RIGHTS OF PARTICIPANTS AND BENEFICIARIES - NO LIEN. (a) This Plan is designed to be an unfunded, nonqualified plan. Nothing contained herein shall be deemed to create a trust or lien in favor of any Participant or Beneficiary on any assets of an Employer. The Employers shall have no obligation to purchase any assets that do not remain subject to the claims of the creditors of the Employers for use in connection with the Plan. No Participant or Beneficiary or any other person shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Employers prior to the time that such assets are paid to the Participant 21 21 or Beneficiary as provided herein. Each Participant and Beneficiary shall have the status of a general unsecured creditor of his Employer. The amount standing to the credit of any Participant's Sub-Account is purely notional and affects only the calculation of benefits payable to or in respect of him. It does not give the Participant any right or entitlement (whether legal, equitable or otherwise) to any particular assets held for the purposes of the Plan or otherwise. (b) Notwithstanding any provision of the Plan to the contrary, an Employer shall not be required to make any payment hereunder to any Participant or Beneficiary if the Employer is Insolvent at the time such payment is due to be made. SECTION 9.3 NO GUARANTEE OF EMPLOYMENT. Nothing in this Plan shall be construed as guaranteeing future employment to Participants. A Participant continues to be an Employee of an Employer solely at the will of such Employer subject to discharge at any time, with or without cause. SECTION 9.4 PAYMENT TO GUARDIAN. If a Benefit payable hereunder is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Plan Administrator may direct payment of such Benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Plan Administrator may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Employers from all liability with respect to such Benefit. SECTION 9.5 ASSIGNMENT. (a) Subject to Subsection (b), no right or interest under this Plan of any Participant or Beneficiary shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of the Participant or Beneficiary. (b) Notwithstanding the foregoing, the Plan Administrator shall honor a judgment, order or decree from a state domestic relations court which requires the payment of all or a part of a Participant's or Beneficiary's vested interest under this Plan to an "alternate payee" as defined in Code Section 414(p). 22 22 SECTION 9.6 SEVERABILITY. If any provision of this Plan or the application thereof to any circumstance(s) or person(s) is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the application of such provision to other circumstances or persons shall not be affected thereby. ARTICLE X ADMINISTRATION OF PLAN ---------------------- SECTION 10.1 ADMINISTRATION. (a) IN GENERAL. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall have discretion to interpret where necessary all 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 make factual findings with respect to any issue arising under the Plan, to determine the rights and status under the Plan of Participants or other persons, to resolve questions (including factual questions) or disputes arising under the Plan and to make any determinations with respect to the benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the foregoing, the Plan Administrator is hereby granted the authority (i) to determine whether a particular employee is a Participant, and (ii) to determine if a person is entitled to Benefits hereunder and, if so, the amount and duration of such Benefits. The Plan Administrator's determination of the rights of any person hereunder shall be final and binding on all persons, subject only to the provisions of Sections 10.3 and 10.4 hereof. (b) DELEGATION OF DUTIES. The Plan Administrator may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Benefits, to a named administrator or administrators. SECTION 10.2 REGULATIONS. The Plan Administrator shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of the Plan or to interpret the provisions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan. The rules, regulations and interpretations made by the Plan Administrator shall, subject only to the provisions of Sections 10.3 and 10.4 hereof, be final and binding on all persons. 23 23 SECTION 10.3 CLAIMS PROCEDURES. The Plan Administrator shall determine the rights of a person to any Benefits hereunder. Any person who believes that he has not received the Benefits to which he is entitled under the Plan may file a claim in writing with the Plan Administrator. The Plan Administrator shall, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant within the first 90 day period), either allow or deny the claim in writing. If a claimant does not receive written notice of the Plan Administrator's decision on his claim within the above-mentioned period, the claim shall be deemed to have been denied in full. A denial of a claim by the Plan Administrator, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include: (a) the specific reasons for the denial; (b) specific reference to pertinent Plan provisions on which the denial is based; (c) 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 (d) an explanation of the claim review procedure. A claimant whose claim is denied (or his duly authorized representative) may within 60 days after receipt of denial of a claim file with the Plan Administrator a written request for a review of such claim. If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Plan Administrator on his claim. If such an appeal is so filed within such 60 day period, the Company (or its delegate) shall conduct a full and fair review of such claim. During such review, the claimant shall be given the opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing. For this purpose, the Company (or its delegate) shall have the same power to interpret the Plan and make findings of fact thereunder as is given to the Plan Administrator under Section 10.1(a) above. The Company shall mail or deliver to the claimant a written decision on the matter based on the facts and the 24 24 pertinent provisions of the Plan within 60 days after the receipt of the request for review (unless special circumstances require an extension of up to 60 additional days, in which case written notice of such extension shall be given to the claimant prior to the commencement of such extension). Such decision shall be written in a manner calculated to be understood by the claimant, shall state the specific reasons for the decision and the specific Plan provisions on which the decision was based and shall, to the extent permitted by law, be final and binding on all interested persons. If the decision on review is not furnished to the claimant within the above-mentioned time period, the claim shall be deemed to have been denied on review. SECTION 10.4 REVOCABILITY OF PLAN ADMINISTRATOR/COMPANY ACTION. Any action taken by the Plan Administrator or the Company with respect to the rights or benefits under the Plan of any person shall be revocable by the Plan Administrator or the Company as to payments not yet made to such person, and acceptance of any Benefits under the Plan constitutes acceptance of and agreement to the Plan Administrator's or the Company's making any appropriate adjustments in future payments to such person (or to recover from such person) any excess payment or underpayment previously made to him. SECTION 10.5 AMENDMENT. The Committee may at any time (without the consent of any Employer) amend any or all of the provisions of this Plan, except that (a) no such amendment may adversely affect any Participant's vested Benefit as of the date of such amendment, and (b) no such amendment may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any amendment shall be in the form of a written instrument executed by an officer of the Company on the order of the Committee. Subject to the foregoing provisions of this Section, such amendment shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. SECTION 10.6 TERMINATION. (a) The Company (without the consent of any Employer), in its sole discretion, may terminate this Plan at any time and for any reason whatsoever, except that, subject to Subsection (b) hereof, (i) no such termination may adversely affect any Participant's vested Benefit as of the date of such termination and (ii) no such termination may suspend the crediting of earnings on the balance of a Participant's Account, 25 25 until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any such termination shall be expressed in the form of a written instrument executed by an officer of the Company on the order of the Company. Subject to the foregoing provisions of this Section, such termination shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. Written notice of any termination shall be given to the Participants as soon as practicable after the instrument is executed. (b) Notwithstanding anything in the Plan to the contrary, in the event of a termination of the Plan (or any portion thereof), the Company, in its sole and absolute discretion, shall have the right to change the time and form of distribution of Participants' Excess Retirement Benefits including requiring that all amounts credited to Participant's Account hereunder be immediately distributed in the form of lump sum payments. SECTION 10.7 WITHDRAWAL BY EMPLOYER. Any Employer (other than the Company) which adopts this Plan may elect separately to withdraw from such Plan and such withdrawal shall constitute a termination of the Plan as to it; provided, however, that (a) such terminating Employer shall continue to be an Employer for the purposes hereof as to Participants or Beneficiaries to whom it owes obligations hereunder, and (b) such termination shall be subject to the limitations and other conditions described in Section 10.6, treating the Employer as if it were the Company. EXECUTED, this 8th day of August, 2000. --- ------ NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Charles A. Bittenbender ---------------------------- Title: Assistant Secretary 26 EXHIBIT A --------- Employees Eligible to Make Post-1999 Excess Deferrals ----------------------------------------------------- INTENTIONALLY OMITTED EX-10.LXXXV 14 l87125bex10-lxxxv.txt EXHIBIT 10(LXXXV) 1 Exhibit 10 (lxxxv) AMENDMENT NO. 6 TO THE NACCO MATERIALS HANDLING GROUP, INC. LONG-TERM INCENTIVE COMPENSATION PLAN ------------------------------------- NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 6 to the NACCO Materials Handling, Inc. Long-Term Incentive Compensation Plan (the "Plan"), effective as of the date of execution. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 --------- The Plan is hereby amended by adding the following new paragraphs to the beginning thereof, to read as follows: "Freeze of Benefits, Vesting and Termination of Plan Effective as of January 1, 2000, the Company has decided to replace the Plan with another incentive compensation plan. Consequently, notwithstanding anything in the Plan to the contrary: 1. Effective as of the date of the execution of this Amendment, no additional Awards shall be made under the Plan and benefits under the Plan shall be frozen. Since, under Section 2(b) of the Plan, the Book Value of the Book Value Appreciation Units is determined as of the Quarter Date preceding the applicable date, all Book Value Appreciation Units currently outstanding under the Plan shall be valued as of December 31, 1999, which is the Quarter Date preceding the date on which benefits under the Plan were frozen. 2. Effective as of May 5, 2000, pursuant to the powers granted to the Nominating, Organization and Compensation Committee of the Board of Directors under Section 8 hereof, the Plan is hereby terminated. Under Section 5.2(a)(iv) of the Plan, therefore, all outstanding Book Value Appreciation Units shall be vested as of the date of termination. As such, as soon as practicable after that date, grantees shall receive a check in full payment of such Book Value Appreciation Units or the value thereof shall be deferred under and into the Unfunded Plan (for those grantees who have made an irrevocable election to defer receipt of all or part of their Book Value Appreciation Units in accordance with the terms of the Unfunded Plan). EXECUTED this 24th day of March, 2000. ---- ----- NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Reginald R. Eklund ------------------------ Title: President and CEO EX-10.LXXXVI 15 l87125bex10-lxxxvi.txt EXHIBIT 10(LXXXVI) 1 Exhibit 10 (lxxxvi) AMENDMENT NO. 7 TO THE NACCO MATERIALS HANDLING GROUP, INC. LONG-TERM INCENTIVE COMPENSATION PLAN ------------------------------------- NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 7 to the NACCO Materials Handling, Inc. Long-Term Incentive Compensation Plan (the "Plan"), effective as of March 29, 2000. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 --------- Paragraph 2 of the introduction to the Plan (which was added by Amendment No. 6 to the Plan) is hereby amended in its entirety to read as follows: "2 Effective as of May 5, 2000, pursuant to the powers granted to the Nominating, Organization and Compensation Committee of the Board of Directors under Section 8 hereof, the Plan is hereby terminated. Under Section 5.2(a)(iv) of the Plan, therefore, all outstanding Book Value Appreciation Units shall be vested as of the date of termination. As such, as soon as practicable after that date, grantees shall receive a check in full payment of the value of such Book Value Appreciation Units or the value thereof shall be deferred under and into the Unfunded Plan (for those grantees who have made an irrevocable election to defer receipt of all or part of their Book Value Appreciation Units in accordance with the terms of the Unfunded Plan). For this purpose, the "value of" the Book Value Appreciation Units shall be equal to their value as of March 29, 2000, increased at the rate of 8.03% for the period from April 1, 2000 through May 31, 2000. EXECUTED this 23rd day of June, 2000. ---- ---- NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Charles A. Bittenbender --------------------------- Title: Assistant Secretary EX-10.CXX 16 l87125bex10-cxx.txt EXHIBIT 10(CXX) 1 Exhibit 10(cxx) HAMILTON BEACH/PROCTOR-SILEX. INC ANNUAL INCENTIVE COMPENSATION PLAN - 2001 GENERAL Hamilton Beach/Proctor-Silex, Inc. (the "Company") has established an Annual Incentive Compensation Plan (the "Plan") as part of a competitive compensation program for the Officers and key management employees of the Company and its Subsidiaries. This Plan is also referred to as the Short Term Incentive Compensation Plan. PLAN OBJECTIVE The Company desires to attract and retain talented employees to enable the Company to meet its financial and business objectives. The objective of the Plan is to provide an opportunity to earn annual incentive compensation to those employees whose performance has a significant impact on the Company's short-term and long-term profitability. ADMINISTRATION AND PARTICIPATION The Plan is administered by the Nominating, Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee: a. May amend, modify, or discontinue the Plan. b. Will approve participation in the Plan. Generally, participants will include all employees in Hay Salary Job Grades 14 and above. Employees who voluntarily terminate their employment prior to year-end are not entitled to an award, and employees joining the Company after August of any year will not be entitled to an award. However, the Committee may select any employee who has contributed significantly to the Company's profitability to participate in the Plan and receive an annual incentive compensation award. c. Will determine the annual performance criteria which generates the incentive compensation pool. d. Will determine the total amount of both the target and actual annual incentive compensation pool. e. Will approve individual incentive compensation awards to Officers and employees above Hay Salary Job Grade 17. f. May delegate to the Chief Executive Officer of the Company the power to approve incentive compensation awards to employees in and below Hay Salary Job Grade 17. g. May consider at the end of each year the award of a discretionary bonus amount to non- participants as an addition to the regular incentive compensation pool on a special one-time basis to motivate individuals not eligible to participate in the Plan, h. May approve a pro rata incentive compensation award for participants in the Plan whose employment is terminated (1) due to death, disability, retirement or facility closure, such award to be determined pursuant to the provisions of subparagraphs e. and f. above or (2) under other circumstances at the recommendation of the Chief Executive Officer of the Company. DETERMINATION OF CORPORATE INCENTIVE COMPENSATION POOL Each participant in the Plan will have an individual target incentive compensation percentage which is determined by the participant's Hay Salary Job Grade. This percentage is multiplied by the midpoint of the participant's Hay Salary Job Grade to determine his/her individual target incentive compensation award. The total of the target incentive compensation awards of all participants equals the target corporate incentive compensation pool (the "Target Pool"). The Target Pool is approved each year by the Committee. 1 2 The actual corporate incentive compensation pool (the " Actual Pool") is determined at the end of each year based on the Company's actual performance against specific criteria established in the beginning of the year by the Committee. The Target Pool is adjusted upwards or downwards by corporate performance adjustment factors to determine the Actual Pool. In no event will the actual Pool exceed 150% of the Target Pool, except to the extent that the Committee elects to increase the Actual Pool by up to 10%, as described below. It is the intent of the Plan that the Actual Pool, as determined above, will be the final total corporate incentive compensation pool. However, the Committee, in its sole discretion, may increase or decrease by up to 10% the Actual Pool or may approve an incentive compensation pool where there would normally be no pool due to Company performance which is below the criteria established for the year. The Actual and Target Pools exclude commission personnel such as salespersons, regional general managers, and manufacturers representatives. DETERMINATION OR INDIVIDUAL INCENTIVE COMPENSATION AWARDS Hay Salary Job Grades and the corresponding target incentive percentage for each participant in the Plan will be established at the beginning of each year and approved by the Committee. Individual target incentive compensation will then be adjusted by the appropriate pool factor. Such adjusted individual incentive compensation will then be further modified based on a participant's performance as compared to his individual goals for the year. The total of all individual incentive compensation awards must not exceed the Actual Pool for the year. PERFORMANCE TARGETS -SEE PLAN SUMMARY 2 EX-10.CXXV 17 l87125bex10-cxxv.txt EXHIBIT 10(CXXV) 1 Exhibit 10 (cxxv) THE HAMILTON BEACH/PROCTOR-SILEX, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 1, 2000) ---------------------------------------------------- 2 HAMILTON BEACH/PROCTOR-SILEX, INC. UNFUNDED BENEFIT PLAN Hamilton Beach/Proctor-Silex, Inc. (the "Company") does hereby amend and completely restate the Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan to read as follows, effective November 1, 2000. ARTICLE I PREFACE SECTION 1.1 EFFECTIVE DATE. The original effective date of this Plan was March 10, 1993. The effective date of this amendment and restatement is November 1, 2000. SECTION 1.2 PURPOSE OF THE PLAN. The purpose of this Plan is to provide for certain Employees (a) the benefits they would have received under the Cash Balance Plan but for (i) the dollar limitation on Compensation taken into account as a result of Section 401(a)(17) of the Code, and (ii) the limitations imposed under Section 415 of the Code, and/or (b) the benefits they would have received under the Savings Plan but for the limitations imposed under Section 402(g), 401(m), 401(a)(17), 401(k)(3) or 415 of the Code. SECTION 1.3 GOVERNING LAW. This Plan shall be regulated, construed and administered under the laws of the State of Ohio, except when preempted by federal law. SECTION 1.4 GENDER AND NUMBER. For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural unless otherwise clearly required by the context. ARTICLE II DEFINITIONS Except as otherwise provided in this Plan, terms defined in the Qualified Plans as they may be amended from time to time shall have the same meanings when used herein, unless a different meaning is clearly required by the context of this Plan. In addition, the following words and phrases shall have the following respective meanings for purposes of this Plan. SECTION 2.1 ACCOUNT shall mean the record maintained by the Company in accordance with Section 3.5 as the sum of the Participant's Excess Profit Sharing Sub-Account, Basic Excess 401(k) Sub-Account, Basic Excess Matching Sub-Account, Additional Excess 401(k) Sub-Account and Additional Excess Matching Sub-Account. SECTION 2.2 ADJUSTED ROE. (a) For purposes of this Section, the following terms shall have the following meanings: 3 (i) "NET INCOME (BEFORE EXTRAORDINARY ITEMS)" is defined as consolidated net income, as defined by general accepted accounting principals ("GAAP"), for the Company for the subject year before extraordinary items, but including any extraordinary items related to refinancings (net of tax); (ii) "AMORTIZATION OF GOODWILL" is defined as the consolidated amortization expense related to the intangible asset goodwill for the Company for the subject year; (iii) "WEIGHTED AVERAGE STOCKHOLDERS' EQUITY" is calculated by adding the consolidated stockholders' equity for the Company, 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 consolidated 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) "Adjusted ROE" shall mean the average return on equity of the Company calculated for the applicable time period, based on A divided by B, where: A = Net Income (before extraordinary items) + Amortization of Goodwill; and B = Weighted Average (Shareholders' Equity + Accumulated Amortization of Goodwill) Adjusted ROE shall be determined at least annually by the Company. SECTION 2.3 BENEFICIARY shall mean the person or persons designated by the Participant as his Beneficiary under this Plan, in accordance with the provisions of Article VII hereof. SECTION 2.4 CASH BALANCE EMPLOYEE shall mean a participant in the Cash Balance Plan. SECTION 2.5 CASH BALANCE PLAN shall mean Part II of the Combined Defined Benefit Plan for NACCO Industries, Inc. and Its Subsidiaries (commonly known as the "Hamilton Beach/Proctor-Silex, Inc. Profit Sharing Retirement Plan") (or any successor thereto), as the same may be amended from time to time. Benefits under the Cash Balance Plan were permanently frozen effective for Plan Years beginning on or after January 1, 1997. SECTION 2.6 COMPANY shall mean Hamilton Beach/ Proctor-Silex, Inc. SECTION 2.7 COMPENSATION. For purposes of Sections 3.2 and 3.3 of the Plan, the term "Compensation" shall have the same meaning as under the Savings Plan, except that Compensation shall be deemed to include (a) the amount of compensation deferred by the Participant under this Plan and (b) amounts in excess of the limitation imposed by Code Section 401(a)(17). 2 4 SECTION 2.8 EXCESS RETIREMENT BENEFIT OR BENEFIT shall mean an Excess Pension Benefit, an Excess Profit Sharing Benefit, a Basic or Additional Excess 401(k) Benefit or a Basic or Additional Excess Matching Benefit (as described in Article III) which is payable to or with respect to a Participant under this Plan. SECTION 2.9 FIXED INCOME FUND shall mean the Stable Asset Fund under the Savings Plan or any equivalent fixed income fund thereunder which is designated by the NACCO Industries, Inc. Retirement Funds Investment Committee as the successor to the Stable Asset Fund. SECTION 2.10 SECTION 2.10. 401(k) EMPLOYEE shall mean a participant in the Savings Plan who is eligible for Before-Tax and Matching Employer Contributions thereunder. SECTION 2.11 INSOLVENT. For purposes of this Plan, the Company shall be considered Insolvent at such time as it (a) is unable to pay its debts as they mature, or (b) is subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code. SECTION 2.12 Participant. (a) For purposes of Section 3.1 of the Plan, the term "Participant" shall mean a Cash Balance Employee whose benefit under the Cash Balance Plan is limited by the application of Section 401(a)(17) or 415 of the Code. (b) For purposes of Section 3.2 of the Plan, the term "Participant" shall mean a Profit Sharing Employee (i) whose Post-1996 Profit Sharing Contributions for a Plan Year are limited by the application of Section 401(a)(17) or 415 of the Code and (ii) who is classified in job grades 17 or above. (c) For purposes of Sections 3.3 and 3.4 of the Plan, the term "Participant" shall mean a 401(k) Employee (i) who is unable to make all of the Before-Tax Contributions that he has elected to make to the Savings Plan, or who is unable to receive the maximum amount of Post-1994 Matching Employer Contributions under the Savings Plan, because of the limitations imposed under Section 402(g), 401(a)(17), 401(k)(3) or 401(m) of the Code and (ii) who is classified in job grades 17 or above. (d) The term "Participant" shall also include any other person who, as of October 31, 2000, was entitled to receive a Benefit under the Plan. SECTION 2.13 PLAN shall mean the Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan as herein set forth or as duly amended. SECTION 2.14 Plan Administrator shall mean the Company. SECTION 2.15 PLAN YEAR shall mean the calendar year. 3 5 SECTION 2.16 PROFIT SHARING EMPLOYEE shall mean a participant in the Savings Plan who is eligible for Post-1996 Profit Sharing Contributions. SECTION 2.17 QUALIFIED PLAN shall mean (a) for Cash Balance Employees, the Cash Balance Plan, (b) for Profit Sharing Employees, the profit-sharing portion of the Savings Plan and (c) for 401(k) Employees, the Before-Tax Contributions and Matching Employer Contributions portion of the Savings Plan. References throughout this Plan to a "Qualified Plan" shall be deemed to refer to the underlying Qualified Plan to which a particular Benefit relates. SECTION 2.18 SAVINGS PLAN shall mean the Hamilton Beach/Proctor-Silex, Inc. Employees' Retirement Savings Plan (401(k)), as the same may be amended from time to time, or any successor thereto. SECTION 2.19 UNFORESEEABLE EMERGENCY shall mean an event which results (or will result) in severe financial hardship to the Participant as a consequence of an unexpected illness or accident or loss of the Participant's property due to casualty or other similar extraordinary or unforeseen circumstances out of the control of the Participant. SECTION 2.20 VALUATION DATE shall mean the last business day of each Plan Year and any other date chosen by the Plan Administrator. ARTICLE III EXCESS RETIREMENT BENEFITS SECTION 3.1 EXCESS PENSION BENEFITS. The Excess Pension Benefit payable to a Participant who is a Cash Balance Employee shall be a monthly benefit equal to the excess, if any, of (a) the amount of the monthly benefit that would be payable to such Participant under the Cash Balance Plan (in the form actually paid) if such Plan did not contain the limitations imposed under Sections 401(a)(17) and 415 of the Code and, effective as of January 1, 1995, the definition of Compensation under such Plan included any amounts deferred under Section 3.3 of this Plan, OVER (b) the amount of the monthly benefit that is actually payable to the Participant under the Cash Balance Plan. SECTION 3.2 EXCESS PROFIT SHARING BENEFITS. At the time described in Section 3.5(a), the Company shall credit to a Sub-Account (the "Excess Profit Sharing Sub-Account") established for each Participant who is a Profit Sharing Employee, an amount equal to the excess, if any, of (a) the amount of the Company's Post-1996 Profit Sharing Contribution which would have been made to the profit sharing portion of the Savings Plan on behalf of the Participant if (i) such Plan did not contain the limitations imposed under Sections 401(a)(17) and 415 of the Code and (ii) the term "Compensation" (as defined in Section 2.7 hereof) were used for purposes of determining the amount of profit sharing contributions under the Savings Plan, OVER (b) the amount of the Company's Post-1996 Profit Sharing Contribution which is actually made to the Savings Plan on behalf of the Participant for such Plan Year (the "Excess Profit Sharing Benefits"). 4 6 SECTION 3.3 Basic and Additional Excess 401(k) Benefits. (a) AMOUNT OF EXCESS 401(K) BENEFITS. Each 401(k) Employee who is a Participant, may, prior to the first day of any Plan Year, by completing an approved deferral election form direct the Company to reduce his Compensation for such Plan Year by the difference between (i) a specified percentage, in 1% increments, with a maximum of 17%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions actually permitted to be contributed for him to the Savings Plan for such Plan Year by reason of the application of the limitations imposed under Sections 402(g), 401(a)(17), or 401(k)(3) of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits"). (b) CLASSIFICATION OF EXCESS 401(K) BENEFITS. The Excess 401(k) Benefits for a particular Plan Year shall be calculated monthly and shall be further divided into the "Basic Excess 401(k) Benefits" and the "Additional Excess 401(k) Benefits" as follows: (i) The Basic Excess 401(k) Benefits shall be determined by multiplying each Excess 401(k) Benefit by a fraction, the numerator of which is the lesser of the percentage of Compensation elected to be deferred in the 401(k) Deferral Election Form for such Plan Year or 7% and the denominator of which is the percentage of Compensation elected to be deferred; and (ii) The Additional Excess 401(k) Benefits (if any) shall be determined by multiplying such Excess 401(k) Benefit by a fraction, the numerator of which is the difference between (1) the percentage of Compensation elected to be deferred in the 401(k) Deferral Election Form for such Plan Year and (2) 7%, and the denominator of which is the percentage of Compensation elected to be deferred. The Basic Excess 401(k) Benefits shall be credited to the Basic Excess 401(k) Sub-Account under this Plan and the Additional Excess 401(k) Benefits shall be credited to the Additional Excess 401(k) Sub-Account hereunder. The Basic and Additional Excess 401(k) Sub-Accounts shall be referred to collectively as the "Excess 401(k) Sub-Account." (c) Rules Relating to Deferral Elections. (i) DEFERRAL PERIOD/PAYMENT DATE. The initial deferral election made by a Participant shall also contain the Participant's election regarding the time of the commencement of payment of the Participant's entire Excess 401(k) Sub-Account hereunder. The Participant may elect to commence payment of his Excess 401(k) Sub-Account as soon as practicable following (1) the date on which he ceases to be an Employee of a Controlled Group Member, (2) January 1st of the year following the date on which he ceases to be an Employee of a Controlled Group Member, (3) the date on which he attains a specified age, or (4) the earlier or later of such dates. A Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his Excess 401(k) Sub-Account as soon as practicable following the date on which he ceases to be an Employee of a Controlled Group Member. 5 7 (ii) CHANGE OF PAYMENT DATE. Notwithstanding the foregoing, a Participant who is an Employee may elect to change the payment date selected (or deemed selected) for his Excess 401(k) Sub-Account to one of the other dates permitted under (i) above; provided, however that (1) the form electing such change is filed with the Plan Administrator at least two (2) years prior to the original payment date and while the Participant is an Employee, (2) the new payment date is at least two (2) years after the date the form is filed and (3) the Participant remains employed throughout such two (2) year period. Any election to change the payment date which does not meet all of the foregoing requirements shall not be valid and, in such case, payment shall be made in accordance with the Participant's last effective payment date election. (iii) SPECIAL ELECTION. Due to administrative errors on the part of the Company, all payment date elections which were made by Participants who are actively employed by the Company on November 1, 2000 shall be deemed null and void. Such Participants shall be given new payment date election forms which must be completed during a 45-day election period specified by the Company. Such elections shall supercede any prior elections. Any such Participant who does not timely and properly file such an election form shall be deemed to have elected to receive all amounts credited to his Excess 401(k) Sub-Account (whether before or after the Effective Date of this restatement of the Plan) as soon as practicable following the date on which he ceases to be an Employee of the Controlled Group; provided, however, that such a Participant may elect to change such deemed payment date in accordance with the requirements of (2) above. (d) EFFECT AND DURATION OF DEFERRAL ELECTION. Any direction by a Participant to make deferrals of Excess 401(k) Benefits hereunder shall be effective with respect to Compensation otherwise payable to the Participant during the Plan Year for which the 401(k) Deferral Election Form is in effect, and the Participant shall not be eligible to receive such Excess 401(k) Benefits. Instead, such amounts shall be credited to the Participant's Basic and Additional Excess 401(k) Sub-Accounts (as applicable) as provided in Section 3.5(b). Any directions made in accordance with Subsection (a) above shall be irrevocable and shall remain in effect for subsequent Plan Years unless changed or terminated by the Participant for Plan Years commencing after such change or termination, on the appropriate form provided by the Plan Administrator, prior to the first day of such subsequent Plan Year. (e) AUTOMATIC TERMINATION/SUSPENSION OF DEFERRAL ELECTION. (i) A Participant's direction to make deferrals of Excess 401(k) Benefits shall automatically terminate on the earlier of the date on which (1) the Participant ceases employment with the Company, (2) the Company is deemed Insolvent, (3) the Participant is no longer eligible to make deferrals of Excess 401(k) Benefits hereunder, or (4) the Plan is terminated. (ii) Any Participant whose eligibility to make Before-Tax Contributions to the Savings Plan has been suspended because he has taken a hardship withdrawal from the Savings Plan shall not be eligible to make deferrals of Excess 401(k) Benefits under this Plan for the period of his suspension from the Savings Plan. 6 8 (iii) The Plan Administrator may, in its sole and absolute discretion, pursuant to nondiscriminatory rules adopted by the Plan Administrator, reduce and/or cease the deferral of Excess 401(k) Benefits being made by one or more Participants, to the extent deemed necessary or desirable in order to satisfy the requirements of any applicable law (including, without limitation, federal securities laws). SECTION 3.4 Excess Matching Benefits. (a) AMOUNT. A 401(k) Employee shall have credited to his Basic or Additional Excess Matching Sub-Account (as applicable) an amount equal to the Post-1994 Matching Employer Contributions attributable to the Basic or Additional Excess 401(k) Benefits that he is prevented from receiving under the Savings Plan because of the limitations imposed under Code Sections 402(g), 401(a)(17), 401(k)(3) and 401(m) (collectively, the "Excess Matching Benefits"). (b) TIME OF PAYMENT. The Excess Matching Benefits shall be paid (or commence to be paid) at the same time as Participant's Excess 401(k) Benefits. SECTION 3.5 PARTICIPANT'S ACCOUNT. The Company shall establish and maintain on its books an Account for each Participant which shall contain the following entries: (a) Credits to an Excess Profit Sharing Sub-Account for the Excess Profit Sharing Benefits described in Section 3.2, which shall be credited to the Sub-Account at the time the Profit Sharing Contributions are otherwise credited to Participants' Accounts under the Savings Plan; (b) Credits to a Basic or Additional Excess 401(k) Sub-Account (as applicable) for the Basic and Additional Excess 401(k) Benefits described in Section 3.3, which shall be credited to the Sub-Account when a 401(k) Employee is prevented from making a Before-Tax Contribution under the Savings Plan; (c) Credits to a Basic or Additional Excess Matching Sub-Account (as applicable) for the Basic or Additional Excess Matching Benefits described in Section 3.4, which shall be credited to the Sub-Account when a 401(k) Employee is prevented from receiving Post-1994 Matching Employer Contributions under the Savings Plan; (d) Credits to all such Sub-Accounts for the earnings described in Article IV, which shall continue until the Sub-Accounts have been distributed to the Participant or his Beneficiary; and (e) Debits for any distributions made from such Sub-Accounts and any amounts forfeited under Section 6.1(d). To the extent determined necessary by the Company, the Company may also establish a "notional account" in the name of each Cash Balance Employee to reflect the Excess Pension benefits payable to such Employees. 7 9 SECTION 3.6 EFFECT ON OTHER BENEFITS. Benefits payable to or with respect to a Participant under the Qualified Plans or any other Company-sponsored (qualified or nonqualified) plan, if any, are in addition to those provided under this Plan. ARTICLE IV EARNINGS SECTION 4.1 Earnings on Basic 401(k) and Matching Sub-Accounts and Profit Sharing Sub-Accounts. (a) Subject to Subsection (b) and Section 4.3, at the end of each calendar month during a Plan Year, the Excess Profit Sharing Sub-Account, Basic Excess 401(k) Sub-Account and Basic Excess Matching Sub-Account of each Participant shall be credited with an amount determined by multiplying such Participant's average Sub-Account balance during such month by the blended rate earned during such month by the Fixed Income Fund. Notwithstanding the foregoing, in the event that the Adjusted ROE determined for such Plan Year exceeds the rate credited to the Sub-Accounts under the preceding sentence, such Sub-Accounts shall retroactively be credited with the difference between (1) the amount determined under the preceding sentence, and (2) the amount determined by multiplying the Participant's average Sub-Account balance during each month of such Plan Year by the Adjusted ROE determined for such Plan Year, compounded monthly. (b) The Adjusted ROE calculation described in Subsection (a) shall be made during the month in which the Participant terminates employment and shall be based on the year-to-date Adjusted ROE for the month ending prior to the date the Participant terminated employment, as calculated by the Company. For any subsequent month, such Adjusted ROE calculation shall not apply. The Fixed Income Fund calculation described above for the month in which the Participant receives a distribution from his Sub-Account shall be based on the blended rate earned during the preceding month by the Fixed Income Fund. SECTION 4.2 EARNINGS ON ADDITIONAL 401(K) AND MATCHING SUB-ACCOUNTS. Subject to Section 4.3, at the end of each calendar month during a Plan Year, the Additional Excess 401(k) Sub-Account and Additional Excess Matching Sub-Account of each Participant shall be credited with an amount determined by multiplying such Participant's average Sub-Account balance during such month by the blended rate earning during such month by the Fixed Income Fund. The earnings calculation for the month in which the participant receives a distribution from his Sub-Account shall be based on the blended rate earned during the preceding month by the Fixed Income Fund. SECTION 4.3 Changes in Limitations on Earnings Assumptions. (a) The NACCO Industries, Inc. Benefits Committee (the "Committee") may change (but not suspend) the earnings rate credited to Accounts hereunder at any time upon at least 30 days advance notice to Participants. (b) Notwithstanding any provision of the Plan to the contrary, in no event will earnings on Accounts for a Plan Year be credited at a rate which exceeds 14%. 8 10 ARTICLE V VESTING SECTION 5.1 VESTING. A Participant shall always be 100% vested in all amounts credited to his Account hereunder and in his Excess Pension Benefits. ARTICLE VI DISTRIBUTION OF BENEFITS TO PARTICIPANTS SECTION 6.1 TIME AND MANNER OF PAYMENT. (a) Excess Pension Benefits. (i) TIMING. A Participant who is a Cash Balance Employee is required to elect the time and manner of payment of his benefits under the Cash Balance Plan before he will be eligible to receive payment of his Excess Pension Benefit hereunder. The Excess Pension Benefit payable to a Participant shall be paid at the same time or times and in the same manner as the benefits payable to the Participant under the Cash Balance Plan. (ii) FORM. Notwithstanding the foregoing, in the event that the monthly payments of the Excess Pension Benefits payable to a Participant hereunder following the Participant's termination of the employment with the Controlled Group amount to less than Fifty Dollars ($50) per month, such Excess Pension Benefits shall be paid in the form of a single lump sum payment. Such lump sum amount shall be equal to the Actuarial Equivalent present value of such Excess Pension Benefits. (b) EXCESS PROFIT SHARING BENEFITS. The Excess Profit Sharing Benefit payable to a Participant shall be paid in the form of a single lump sum payment at the time the corresponding Post-1996 Profit Sharing Contributions payable to the Participant under the Savings Plan commence to be paid. (c) EXCESS 401(k) AND MATCHING BENEFITS. (i) TIMING. A Participant's Excess 401(k) Sub-Account and Excess Matching Sub-Account shall be paid (or commence to be paid) to the Participant as soon as practicable after the date specified in the Participant's last valid election form (as provided in Section 3.3(c)). (ii) NORMAL FORM OF PAYMENT. The Excess 401(k) Sub-Account and Excess Matching Sub-Account shall each be distributed in the form of ten annual installments with each installment being based on the value of the applicable Sub-Account on the Valuation Date immediately preceding the date such installment is to be paid and being a fraction of such value in which the numerator is one and the denominator is the total number of remaining installments to be paid. (iii) OPTIONAL FORMS OF PAYMENT. Notwithstanding the foregoing, the Participant may elect to receive the amounts credited to his Excess 401(k) Sub-Account and/or his Excess Matching Sub-Account in the form of a single lump sum payment or in annual installments for a period of less than 10 years by filing a notice in writing, signed by the 9 11 Participant and filed with the Plan Administrator while the Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. Any such election of the form of payment may be changed at any time and from time to time, without the consent of any other person, by filing a later election in writing that is signed by a Participant and filed with the Plan Administrator while such Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. (iv) UNFORESEEABLE EMERGENCY DISTRIBUTIONS. Notwithstanding the foregoing, the Company may at any time, upon written request of the Participant cause to be paid to such Participant an amount equal to all or any part of the Participant's Excess 401(k) Sub-Account and/or Excess Matching Sub-Account if the Company determines, in its absolute discretion based on such reasonable evidence that it shall require, that such a payment or payments is necessary for the purpose of alleviating the consequences of an Unforeseeable Emergency occurring with respect to the Participant. Payments of amounts because of an Unforeseeable Emergency shall be permitted only to the extent reasonably necessary to satisfy the emergency need. (d) Withdrawals Subject to a 10% Penalty. (i) The provisions of this Subsection shall apply notwithstanding any other provision of the Plan to the contrary. (ii) A Participant who is an Employee may, at any time (and from time to time) elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Additional Excess 401(k) Sub-Account; and (B) the Additional Excess Matching Sub-Account. (iii) In addition to the amounts described in (ii) above, Participants who have ceased to be Employees of the Controlled Group may also elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Basic Excess 401(k) Sub-Account; (B) the Basic Excess Matching Sub-Account; and (C) the Excess Profit Sharing Sub-Account. (iv) Withdrawals under this Subsection shall be equal to the entire amount credited to any such Sub-Account, less 10%. Such 10% reduction shall be treated as a forfeiture hereunder and shall immediately be subtracted from the applicable Sub-Account, never to be restored. (e) PAYMENT RESTRICTION. Notwithstanding any provision of the Plan to the contrary, the payment of all or any portion of the amounts payable hereunder will be deferred to the extent that any amount payable, when added to any other compensation received or to be received by the Participant in the same calendar year, would not be deductible by the Company 10 12 by reason of Section 162(m) of the Code. The amount to be deferred will equal the amount that otherwise would not be deductible by the Company by reason of Section 162(m) of the Code, but in no event greater than the total amount otherwise payable hereunder. The deferred amount shall become payable on December 31 of the first succeeding calendar year in which such amount, when added to all other compensation received or to be received by the Participant in such calendar year, would not be non-deductible by the Company by reason of Section 162(m) of the Code. The Nominating, Organization and Compensation Committee of the Board of Directors, in its sole and absolute discretion, shall have the authority to waive this payment restriction (in whole or in part) upon the written request of the Participant. SECTION 6.2 SMALL SUB-ACCOUNTS. Notwithstanding the foregoing, in the event that the Participant's Account does not exceed $10,000 at the time of such Participant's termination of employment with the Controlled Group, such Account shall automatically be paid to him in a single lump sum payment as soon as practicable following his termination of employment. SECTION 6.3 LIABILITY FOR PAYMENT/EXPENSES. The Company shall be liable for the payment of the Excess Retirement Benefits which are payable hereunder to the Participants. Expenses of administering the Plan shall be paid by the Company. ARTICLE VII BENEFICIARIES SECTION 7.1 BENEFICIARY DESIGNATIONS. A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable to the Plan Administrator) signed by the Participant and filed with the Plan Administrator prior to the Participant's death. Separate Beneficiary designations may be made for each Benefit under the Plan. In the absence of such a designation and at any other time when there is no existing Beneficiary designated hereunder, (a) the Beneficiary of a Participant for his Excess Pension Benefits shall be his beneficiary under the Cash Balance Plan and (b) the Beneficiary of a Participant for his Account shall be his Beneficiary under the Savings Plan. A person designated by a Participant as his Beneficiary who or which ceases to exist shall not be entitled to any part of any payment thereafter to be made to the Participant's Beneficiary unless the Participant's designation specifically provided to the contrary. If two or more persons designated as a Participant's Beneficiary are in existence with respect to a single Excess Retirement Benefit the amount of any payment to the Beneficiary under this Plan shall be divided equally among such persons unless the Participant's designation specifically provides for a different allocation. SECTION 7.2 CHANGE IN BENEFICIARY. (a) Anything herein or in the Qualified Plans to the contrary notwithstanding, a Participant may, at any time and from time to time, change a Beneficiary designation hereunder without the consent of any existing Beneficiary or any other person. A change in Beneficiary hereunder may be made regardless of whether such a change is also made under the applicable underlying Qualified Plan. In other words, the Beneficiary hereunder need not be the same as under the applicable underlying Qualified Plan. 11 13 (b) Any change in Beneficiary shall be made by giving written notice thereof to the Plan Administrator and any change shall be effective only if received by the Plan Administrator prior to the death of the Participant. SECTION 7.3 Distributions to Beneficiaries. (a) AMOUNT OF BENEFITS. (i) AMOUNT OF EXCESS PENSION BENEFIT. The Excess Pension Benefit payable to a Beneficiary under this Plan shall be a monthly benefit equal to the excess, if any, of (A) the amount of the monthly benefit that would be payable to the Beneficiary last effectively designated by the Participant under the Cash Balance Plan (in the form actually paid) if such Plan did not contain the limitations imposed under Sections 401(a)(17) or 415 of the Code and the definition of Compensation under such Plan included any amounts deferred under this Plan OVER (B) the amount of the monthly benefit that is actually paid to such Beneficiary under such Plan. (ii) AMOUNT OF EXCESS PROFIT SHARING BENEFIT. The Excess Profit Sharing Benefit payable to a Participant's Beneficiary under this Plan shall be equal to such Participant's Excess Profit Sharing Sub-Account balance on the date of the distribution of the Sub-Account to the Beneficiary. (iii) AMOUNT OF EXCESS 401(k) AND EXCESS MATCHING BENEFITS. The Excess 401(k) and Excess Matching Benefits payable to a Participant's Beneficiary under this Plan shall be equal to such Participant's Excess 401(k) and Excess Matching Sub-Account balances on the date of the distribution of the Sub-Accounts to the Beneficiary. (b) Time and Manner of Payment. (i) EXCESS PENSION BENEFIT. The Excess Pension Benefit payable to a Beneficiary under this Plan shall be paid at the same time or times and in the same manner as the benefits payable to the Beneficiary last effectively designated by the Participant under the Cash Balance Plan; provided however, that the provisions of Subsection 6.1(a)(ii) shall apply to such Benefit, treating the Beneficiary hereunder as if he were the Participant. (ii) EXCESS PROFIT SHARING BENEFIT/EXCESS 401(k) BENEFIT AND EXCESS MATCHING BENEFIT. The Excess Profit Sharing Benefit, Excess 401(k) Benefit and Excess Matching Benefit payable to a Beneficiary under this Plan shall be paid as soon as practicable following the death of the Participant in the form of a lump sum payment. (c) EFFECT OF DIFFERENT BENEFICIARIES UNDER THIS PLAN AND THE CASH BALANCE PLAN. In the event the Beneficiary designated hereunder for the Excess Pension Benefit is different than the Beneficiary under the Cash Balance Plan, (i) if the Beneficiary hereunder dies after the Participant but while the Beneficiary under the Cash Balance Plan is still living, any 12 14 remaining payments hereunder shall be payable, as they come due, to the estate of the Beneficiary hereunder and (ii) if the Beneficiary hereunder predeceases the Beneficiary under the Cash Balance Plan and the Participant, the Beneficiary hereunder shall revert to the Beneficiary last effectively designated under the Cash Balance Plan unless and until the Participant again makes a change of Beneficiary pursuant to Section 7.2. ARTICLE VIII MISCELLANEOUS SECTION 8.1 LIABILITY OF COMPANY. Nothing in this Plan shall constitute the creation of a trust or other fiduciary relationship between the Company and any Participant, Beneficiary or any other person. SECTION 8.2 LIMITATION ON RIGHTS OF PARTICIPANTS AND BENEFICIARIES - NO LIEN. The Plan is designed to be an unfunded, nonqualified plan. Nothing contained herein shall be deemed to create a trust or lien in favor of any Participant or Beneficiary on any assets of the Company. The Company shall have no obligation to purchase any assets that do not remain subject to the claims of the creditors of the Company for use in connection with the Plan. No Participant or Beneficiary or any other person shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Company prior to the time that such assets are paid to the Participant or Beneficiary as provided herein. Each Participant and Beneficiary shall have the status of a general unsecured creditor of the Company. SECTION 8.3 NO GUARANTEE OF EMPLOYMENT. Nothing in this Plan shall be construed as guaranteeing future employment to Participants. A Participant continues to be an Employee of the Company solely at the will of the Company subject to discharge at any time, with or without cause. SECTION 8.4 PAYMENT TO GUARDIAN. If a Benefit payable hereunder is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Plan Administrator may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such Benefit. SECTION 8.5 ASSIGNMENT. No right or interest under this Plan of any Participant or Beneficiary shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of the Participant or Beneficiary. Notwithstanding the foregoing, the Plan Administrator shall honor a judgment, order or decree from a state domestic relations court which requires the payment of part or all or a Participant's or Beneficiary's vested interest under this Plan to an "alternate payee" as defined in Code Section 414(p). SECTION 8.6 SEVERABILITY. If any provision of this Plan or the application thereof to any circumstance(s) or person(s) is held to be invalid by a court of competent 13 15 jurisdiction, the remainder of the Plan and the application of such provision to other circumstances or persons shall not be affected thereby. ARTICLE IX ADMINISTRATION OF PLAN SECTION 9.1 ADMINISTRATION. (a) IN GENERAL. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall have discretion to interpret where necessary all 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 make factual findings with respect to any issue arising under the Plan, to determine the rights and status under the Plan of Participants, or other persons, to resolve questions (including factual questions) or disputes arising under the Plan and to make any determinations with respect to the benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the foregoing, the Plan Administrator is hereby granted the authority (i) to determine whether a particular Employee is a Participant, and (ii) to determine if a person is entitled to Excess Retirement Benefits hereunder and, if so, the amount and duration of such Benefits. The Plan Administrator's determination of the rights of any person hereunder shall be final and binding on all persons, subject only to the provisions of Sections 9.3 and 9.4 hereof. (b) DELEGATION OF DUTIES. The Plan Administrator may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Excess Retirement Benefits, to a named administrator or administrators. SECTION 9.2 REGULATIONS. The Plan Administrator shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of the Plan or to interpret the provisions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan. The rules, regulations and interpretations made by the Plan Administrator shall, subject only to the provisions of Sections 9.3 and 9.4 hereof, be final and binding on all persons. SECTION 9.3 CLAIMS PROCEDURES. The Plan Administrator shall determine the rights of any person to any Excess Retirement Benefits hereunder. Any person who believes that he has not received the Excess Retirement Benefits to which he is entitled under the Plan may file a claim in writing with the Plan Administrator. The Plan Administrator shall, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant within the first 90 day period), either allow or deny the claim in writing. If a claimant does not receive written notice of the Plan Administrator's decision on his claim within the above-mentioned period, the claim shall be deemed to have been denied in full. A written denial of a claim by the Plan Administrator, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include: (a) the specific reasons for the denial; 14 16 (b) specific reference to pertinent Plan provisions on which the denial is based; (c) 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 (d) an explanation of the claim review procedure. A claimant whose claim is denied (or his duly authorized representative) may within 60 days after receipt of denial of a claim file with the Plan Administrator a written request for a review of such claim. If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Plan Administrator on his claim. If such an appeal is so filed within such 60 day period, the Company (or its delegate) shall conduct a full and fair review of such claim. During such review, the claimant shall be given the opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing. For this purpose, the Company (or its delegate) shall have the same power to interpret the Plan and make findings of fact thereunder as is given to the Plan Administrator under Section 9.1(a) above. The Company shall mail or deliver to the claimant a written decision on the matter based on the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request for review (unless special circumstances require an extension of up to 60 additional days, in which case written notice of such extension shall be given to the claimant prior to the commencement of such extension). Such decision shall be written in a manner calculated to be understood by the claimant, shall state the specific reasons for the decision and the specific Plan provisions on which the decision was based and shall, to the extent permitted by law, be final and binding on all interested persons. If the decision on review is not furnished to the claimant within the above-mentioned time period, the claim shall be deemed to have been denied on review. SECTION 9.4 REVOCABILITY OF PLAN ADMINISTRATOR/ COMPANY ACTION. Any action taken by the Plan Administrator or the Company with respect to the rights or benefits under the Plan of any person shall be revocable by the Plan Administrator or the Company as to payments not yet made to such person, and acceptance of any Excess Retirement Benefits under the Plan constitutes acceptance of and agreement to the Plan Administrator's or the Company's making any appropriate adjustments in future payments to such person (or to recover from such person) any excess payment or underpayment previously made to him. SECTION 9.5 AMENDMENT. The Committee may at any time amend any or all of the provisions of this Plan, except that (a) no such amendment may adversely affect the amount of any Participant's Excess Retirement Benefit as of the date of such amendment and (b) no such amendment may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any amendment shall be in the form of a written instrument executed by an officer of the Company on the order of the Committee. Subject to the 15 17 foregoing provisions of this Section, such amendment shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. SECTION 9.6 TERMINATION. (a) The Company, in its sole discretion, may terminate this Plan at any time and for any reason whatsoever, except that, subject to Subsection (b) hereof, (i) no such termination may adversely affect the amount of any Participant's Excess Retirement Benefit as of the date of such termination and (ii) no such termination may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any such termination shall be expressed in the form of a written instrument executed by an officer of the Company on the order of the Nominating, Organization and Compensation Committee of the Board of Directors of the Company. Subject to the foregoing provisions of this Section, such termination shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. Written notice of any termination shall be given to the Participants as soon as practicable after the instrument is executed. (b) Notwithstanding anything in the Plan to the contrary, in the event of a termination of the Plan (or any portion thereof), the Company, in its sole and absolute discretion, shall have the right to change the time and form of distribution of Participants' Excess Retirement Benefits. Executed, this 17th day of October, 2000. ---- ------- HAMILTON BEACH/PROCTOR-SILEX, INC. By: /s/ Charles A. Bittenbender ------------------------------------- Title: Assistant Secretary 16 EX-13 18 l87125bex13.txt EXHIBIT 13 1 EXHIBIT 13 SELECTED FINANCIAL AND OPERATING DATA NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31 ----------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ----------------------------------------------------------------------------- (In millions, except per share and employee data) Revenues .................................... $2,871.3 $2,635.9 $2,569.3 $2,276.0 $2,302.7 Operating profit ............................ $ 117.9 $ 131.3 $ 198.1 $ 132.0 $ 131.2 Income before extraordinary gain and cumulative effect of accounting change .................... $ 37.8 $ 54.3 $ 102.3 $ 61.8 $ 50.6 Extraordinary gain, net-of-tax .............. 29.9 -- -- -- -- Cumulative effect of accounting change, net-of-tax ...................... -- (1.2) -- -- -- -------- -------- -------- -------- -------- Net income .................................. $ 67.7 $ 53.1 $ 102.3 $ 61.8 $ 50.6 ======== ======== ======== ======== ======== Total assets ................................ $2,193.9 $2,013.0 $1,898.3 $1,729.1 $1,708.1 Long-term debt .............................. $ 450.0 $ 326.3 $ 256.4 $ 230.2 $ 333.3 Stockholders' equity ........................ $ 606.4 $ 562.2 $ 518.3 $ 425.1 $ 379.3 EBITDA* ..................................... $ 164.7 $ 182.6 $ 243.6 $ 170.7 $ 180.1 Basic earnings per share: Income before extraordinary gain and cumulative effect of accounting change ................... $ 4.63 $ 6.67 $ 12.56 $ 7.56 $ 5.67 Extraordinary gain, net-of-tax ............ 3.66 -- -- -- -- Cumulative effect of accounting change, net-of-tax .................... -- (0.15) -- -- -- -------- -------- -------- -------- -------- Net income ............................... $ 8.29 $ 6.52 $ 12.56 $ 7.56 $ 5.67 ======== ======== ======== ======== ======== Diluted earnings per share: Income before extraordinary gain and cumulative effect of accounting change ................... $ 4.63 $ 6.66 $ 12.53 $ 7.55 $ 5.67 Extraordinary gain, net-of-tax ............ 3.66 -- -- -- -- Cumulative effect of accounting change, net-of-tax .................... -- (0.15) -- -- -- -------- -------- -------- -------- -------- Net income ............................... $ 8.29 $ 6.51 $ 12.53 $ 7.55 $ 5.67 ======== ======== ======== ======== ======== Per share data: Cash dividends ............................ $ 0.890 $ 0.850 $ 0.810 $ 0.773 $ 0.743 Market value at December 31 ............... $ 43.69 $ 55.56 $ 92.00 $ 107.19 $ 53.50 Stockholders' equity at December 31........ $ 74.21 $ 68.92 $ 63.83 $ 52.13 $ 46.34 Average shares outstanding .................. 8.167 8.150 8.147 8.171 8.920 Total employees ............................. 17,200 16,000 14,100 13,400 11,800
*EBITDA represents income before taxes, minority interest, extraordinary gain and cumulative effect of accounting change plus net interest and depreciation, depletion and amortization. However interest expense, depreciation, depletion and amortization attributable to project mining subsidiaries are not included. 1 2 FINANCIAL SECTION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Summary ..................................24 The North American Coal Corporation ................26 NACCO Materials Handling Group .....................30 NACCO Housewares Group. ............................35 NACCO and Other ....................................38 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Income and Comprehensive Income ..........................43 Consolidated Balance Sheets ........................44 Consolidated Statements of Cash Flows ..............45 Consolidated Statements of Stockholders' Equity ..........................46 Notes to Consolidated Financial Statements .........47 - -------------------------------------------------------------------------------- FINANCIAL SUMMARY NACCO Industries, Inc. ("NACCO," the parent company) and its wholly owned subsidiaries (collectively, the "Company") operate in three distinct industries: lignite mining, lift trucks and housewares. Results of operations and financial condition are discussed separately by segment, which corresponds with the industry groupings, except that the Company segments its lift truck operations into two components: wholesale manufacturing and retail distribution. Results by segment are also summarized in Note 20 to the Consolidated Financial Statements. The North American Coal Corporation ("NACoal") mines and markets lignite primarily as fuel for power providers. NMHG Holding Co., through its wholly owned subsidiaries, NACCO Materials Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG Retail") (collectively "NMHG") designs, engineers, manufactures, sells and services a full line of lift trucks and service parts marketed worldwide under the Hyster(R) and Yale(R) brand names. NMHG Wholesale includes the manufacture and sale of lift trucks and related service parts, primarily to independent and wholly owned Hyster and Yale retail dealerships. NMHG Retail includes the sale and service of Hyster and Yale lift trucks and related service parts by wholly owned retail dealerships. NACCO Housewares Group ("Housewares") consists of Hamilton Beach-Proctor-Silex, Inc. ("HB-PS"), a leading manufacturer and marketer of small electric motor and heat-driven appliances as well as commercial products for restaurants, bars and hotels, and The Kitchen Collection, Inc. ("KCI"), a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. Selected consolidated operating results of the Company were as follows: 2000 1999 1998 ---- ---- ---- CONSOLIDATED OPERATING RESULTS: Income before extraordinary gain and cumulative effect of accounting change .................. $ 37.8 $ 54.3 $ 102.3 Extraordinary gain, net-of-tax(1) ...................... 29.9 -- -- Cumulative effect of accounting change, net-of-tax(2) ...................... -- (1.2) -- -------- -------- -------- Net income .......................... $ 67.7 $ 53.1 $ 102.3 ======== ======== ======== DILUTED EARNINGS PER SHARE: Income before extraordinary gain and cumulative effect of accounting change .................. $ 4.63 $ 6.66 $ 12.53 Extraordinary gain, net-of-tax ......................... 3.66 -- -- Cumulative effect of accounting change, net-of-tax ......................... -- (.15) -- -------- -------- -------- Net income .......................... $ 8.29 $ 6.51 $ 12.53 ======== ======== ======== (1) An extraordinary gain was recognized in 2000 as a result of a reduction to Bellaire Corporation's closed mine obligations relating to amounts owed to the United Mine Workers of America Combined Benefit Fund arising as a result of the Coal Industry Retiree Health Benefit Act of 1992. See also discussion in Note 4 to the Consolidated Financial Statements. (2) A cumulative effect of a change in accounting was recognized in 1999 for a change in the accounting for start-up costs at NACoal. Prior to 1999, certain start-up costs were deferred and amortized over the life of the related mine. These previously deferred start-up costs were written off as a cumulative effect of a change in accounting as required by Statement of Position 98-5, "Reporting on the Costs of Start-up Activities." See also discussion in Note 2 to the Consolidated Financial Statements. 24 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) The following schedule identifies the components of the changes in consolidated revenues, operating profit and net income for 2000 compared with 1999: Operating Net Revenues Profit Income -------- -------- -------- 1999 ................................... $2,635.9 $ 131.3 $ 53.1 Increase (decrease) in 2000 (excluding Special Items) from: NACoal ................................ 11.5 (6.4) (3.6) NMHG Wholesale ........................ 127.8 25.3 6.3 NMHG Retail ........................... 39.6 .9 (.4) Housewares ............................ 53.2 (14.4) (12.4) NACCO & Other ......................... -- (2.5) 7.0 -------- -------- -------- 2000 OPERATING RESULTS EXCLUDING SPECIAL ITEMS .......................... $2,868.0 $ 134.2 $ 50.0 SPECIAL ITEMS: NACOAL: Write-off of international development costs .................... -- (2.4) (1.5) Cumulative effect of accounting change (1999) .............................. -- -- 1.2 NMHG WHOLESALE: Restructuring charge .................. -- (13.9) (8.3) Freight reclassification .............. 3.3 -- -- NACCO & OTHER: Closed mine obligations, net ..................... -- -- 26.3 -------- -------- -------- 2000 .................................... $2,871.3 $ 117.9 $ 67.7 ======== ======== ======== The special items, in the aggregate, materially affect year-to-year comparability. These items were as follows: NACOAL: In the fourth quarter of 2000, NACoal wrote off $2.4 million ($1.5 million after-tax) of previously capitalized development costs incurred for a power plant and mine development project in Turkey ("Turkey Project write-off"). This write-off resulted from NACoal's decision to cease development of this project in Turkey. In 1999, NACoal recognized the cumulative effect of a required change in accounting for start-up costs of $1.2 million, net-of-tax. NMHG WHOLESALE: In the fourth quarter of 2000, NMHG Wholesale recorded a $13.9 million ($8.3 million after-tax) restructuring charge as a result of a decision to phase out the Danville, Illinois, manufacturing plant. See a further discussion in Note 3 to the Consolidated Financial Statements. Also in the fourth quarter of 2000, NMHG Wholesale recorded a $36.4 million reclassification of freight revenue as a result of adopting the Emerging Issues Task Force's ("EITF") consensus on Issue Number 00-10, "Accounting for Shipping and Handling Fees and Costs" ("EITF 00-10"), which requires freight billed to customers to be included as a component of revenues rather than as an offset to the cost of sales for freight deliveries, which was NMHG Wholesale's prior practice. EITF 00-10 also required restatement of prior years' revenues, which resulted in a $33.1 million increase to revenues in each of 1999 and 1998. The net effect of this change in reporting is an increase to revenues of $3.3 million for 2000 as compared with 1999. NACCO & OTHER: In 2000, Bellaire Corporation ("Bellaire," a wholly owned non-operating subsidiary of NACCO and part of NACCO & Other) recognized an extraordinary gain of $29.9 million, net-of-tax, related to a reduction in the accrual for obligations to the United Mine Workers of America Combined Benefit Fund ("UMWA") arising as a result of the Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"). In addition, Bellaire recognized an increase to certain closed mine reserves of $3.6 million after-tax related to former Eastern U.S. underground mining obligations. See further discussion of these Bellaire adjustments in Notes 3 and 4 to the Consolidated Financial Statements. The net effect of these adjustments relating to closed mine obligations is an increase to net income in 2000 of $26.3 million. In 2000, NACCO began charging fees to the operating subsidiaries for services provided. These fees totaled $10.1 million ($6.6 million after-tax) for the year ended December 31, 2000. See additional discussion in Note 20 to the Consolidated Financial Statements. 25 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) THE NORTH AMERICAN COAL CORPORATION NACoal mines and markets lignite for use primarily as fuel for power providers. The lignite is surface mined in North Dakota, Texas, Louisiana and Mississippi. During 1997, Mississippi Lignite Mining Company ("MLMC") was formed as a joint venture between NACoal and Phillips Coal Company. This joint venture was formed to develop and mine lignite at the Red Hills lignite mine near Ackerman, Mississippi. Development of the mine site began in 1998 and has continued through 2000. Delivery of lignite from MLMC to its customer is expected to begin gradually during the first half of 2001. Delivery of over 3.5 million tons per annum is expected once the customer's power plant becomes fully operational, which is anticipated to be in mid-2001. On October 11, 2000, NACoal acquired certain assets from Phillips Coal Company ("Phillips Acquisition"), including its 75 percent joint venture interest in MLMC, its 50 percent joint venture interest in Red River Mining Company ("Red River") and the related lignite reserves under committed contracts at both MLMC and Red River. As a result of the Phillips Acquisition, NACoal now owns 100 percent of Red River and MLMC. In addition, NACoal acquired from Phillips approximately 560 million tons of undeveloped lignite reserves in Texas, Mississippi and Tennessee. Excluding the Phillips Acquisition, total NACoal coal reserves approximate 2.0 billion tons, with 1.1 billion tons committed to customers pursuant to long-term contracts. Including the Phillips acquisition, at December 31, 2000, NACoal coal reserves approximated 2.8 billion tons, with 1.3 billion tons committed to customers pursuant to long-term contracts. The Phillips Acquisition was accounted for using the purchase method of accounting and, accordingly, the results of operations for the businesses acquired are fully consolidated in the accompanying financial statements beginning October 11, 2000. Prior to the Phillips Acquisition, NACoal accounted for its 25 percent interest in MLMC using the equity method of accounting. In addition to the Phillips Acquisition, NACoal operates four other lignite mines, including three project mining subsidiaries ("Coteau," "Falkirk" and "Sabine") and a NACoal division ("San Miguel"). NACoal also provides dragline mining services ("Florida dragline operations") for a limerock quarry near Miami, Florida. The operating results for the Florida dragline operations, San Miguel and Red River are included in other mining operations. [BAR GRAPH] NACOAL REVENUES $249.1 $262.9 $285.4 $277.7 $289.2 1996 1997 1998 1999 2000 FINANCIAL REVIEW NACoal's three project mining subsidiaries (Coteau, Falkirk and Sabine), which represent a significant portion of NACoal's operations, mine lignite for utility customers pursuant to long-term contracts at prices based on actual cost plus an agreed pre-tax profit per ton. Due to the cost-plus nature of these contracts, revenues and operating profits are affected by increases and decreases in operating costs, as well as by tons sold. Net income of these project mines, however, is not significantly affected by changes in such operating costs, which include costs of operations, interest expense and certain other items. Because of the nature of the contracts at these three mines, operating results for NACoal are best analyzed in terms of lignite tons sold, income before taxes and net income. 26 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) Lignite tons sold by NACoal's operating lignite mines were as follows for the year ended December 31: 2000 1999 1998 ---- ---- ---- Coteau . . . . . . . . . . . . . . . . 16.2 16.4 16.4 Falkirk. . . . . . . . . . . . . . . . 7.7 7.2 7.0 Sabine . . . . . . . . . . . . . . . . 3.5 3.6 3.8 San Miguel . . . . . . . . . . . . . . 3.4 3.4 3.5 Red River. . . . . . . . . . . . . . . .8 .7 1.0 ---- ---- ---- Total lignite. . . . . . . 31.6 31.3 31.7 ==== ==== ==== The Florida dragline operations mined 7.9 million, 8.4 million and 8.3 million cubic yards of limerock for the years ended December 31, 2000, 1999 and 1998, respectively. Revenues, income before taxes, income tax provision (benefit) and net income were as follows for the year ended December 31: 2000 1999 1998 ---- ---- ---- Revenues Project mines .................... $ 250.5 $ 239.9 $ 240.0 Other mining operations ..................... 36.8 35.1 39.1 ------- ------- ------- 287.3 275.0 279.1 Royalties and other .............. 1.9 2.7 6.3 ------- ------- ------- $ 289.2 $ 277.7 $ 285.4 ======= ======= ======= Income before taxes Project mines .................... $ 25.5 $ 25.9 $ 25.2 Other mining operations ..................... (1.6) 2.7 5.5 ------- ------- ------- Total income from operating mines .................... 23.9 28.6 30.7 Royalty income and other income (expense), net .............. (4.0) 1.2 4.8 Other operating expenses ............ (7.4) (7.6) (8.1) ------- ------- ------- 12.5 22.2 27.4 Income tax provision (benefit) ......................... (.1) 4.5 7.1 ------- ------- ------- Income before cumulative effect of accounting change .................. 12.6 17.7 20.3 Cumulative effect of accounting change .................. -- (1.2) -- ------- ------- ------- Net income ........................ $ 12.6 $ 16.5 $ 20.3 ======= ======= ======= 2000 COMPARED WITH 1999 The following schedule identifies the components of the changes in revenues, income before taxes and net income for 2000 compared with 1999: Income Before Net Revenues Taxes Income ------ ------ ------ 1999 ............................. $277.7 $ 22.2 $ 16.5 Increase (decrease) in 2000 from: Project mines Tonnage volume ................. 2.0 .7 .5 Pass-through costs ............. 9.7 -- -- Agreed profit per ton .......... (1.1) (1.1) (.7) Other mining operations Tonnage volume ................. 1.3 1.5 1.0 Average selling price .......... .4 .4 .3 Operating costs ................ -- (6.2) (4.0) ------ ------ ------ Changes from operating mines ................ 12.3 (4.7) (2.9) Royalty income and other income (expense), net ................. (.8) (2.8) (1.8) Other operating expenses ....................... -- .2 .1 Difference between effective and statutory tax rates ...................... -- -- 1.0 ------ ------ ------ $289.2 $ 14.9 $ 12.9 Turkey Project write-off ...................... -- (2.4) (1.5) Cumulative effect of accounting change .............. -- -- 1.2 ------ ------ ------ 2000 .............................. $289.2 $ 12.5 $ 12.6 ====== ====== ====== Because the Phillips Acquisition occurred late in 2000, it had an immaterial effect on operating results in 2000 as compared with 1999. Revenues for 2000 increased as compared with 1999 primarily due to increased pass-through costs at Coteau and Sabine and increased tonnage volume at Falkirk and Red River. Income before taxes for 2000 declined as compared with 1999 primarily due to: (i) increased maintenance, administration and fuel costs at San Miguel, which is not operated on a cost-plus basis, (ii) the Turkey Project write-off (previously discussed), (iii) charges paid to NACCO, which began in 2000, and (iv) reduced royalty income. The decline in net income in 2000 as compared with 1999 as a result of these factors 27 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) was partially offset by (i) a non-recurring cumulative effect of accounting change expense recognized in 1999 for the write-off of previously capitalized start-up costs and (ii) favorable tax adjustments in 2000 relating to the resolution of tax issues provided for in prior years. 1999 COMPARED WITH 1998 The following schedule identifies the components of the changes in revenues, income before taxes and net income for 1999 compared with 1998: Income Before Net Revenues Taxes Income -------- ----- ------ 1998 .............................. $285.4 $ 27.4 $ 20.3 Increase (decrease) in 1999 from: Project mines Tonnage volume .................. (1.4) (.3) (.2) Pass-through costs .............. .3 -- -- Agreed profit per ton ........... 1.0 1.0 .7 Other mining operations Tonnage volume .................. (4.6) (4.6) (3.0) Average selling price ........... .6 .6 .4 Operating costs ................. -- .2 .1 Other ........................... -- 1.0 .7 ------ ------ ------ Changes from operating mines ................. (4.1) (2.1) (1.3) Royalty income and other income (expense), net .................. (3.6) (3.6) (2.4) Other operating expenses ........................ -- .5 .3 Difference between effective and statutory tax rates ....................... -- -- .8 ------ ------ ------ $277.7 $ 22.2 $ 17.7 Cumulative effect of accounting change ............... -- -- (1.2) ------ ------ ------ 1999 .............................. $277.7 $ 22.2 $ 16.5 ====== ====== ====== Revenues for 1999 decreased as compared with 1998 primarily due to decreased tons sold and reduced royalties. Tons sold declined at Red River due to the customer's planned power plant outage during the second quarter of 1999 and a decline in customer demand. Other slight changes in tons sold at all other mines resulted from fluctuations in customer demand. Income before taxes for 1999 declined as compared with 1998 due to: (i) reduced royalty income, (ii) decreased tons sold at Red River, which is not operated on a cost-plus basis, and (iii) increased costs at the San Miguel mine resulting from higher than expected maintenance costs. The decline in income before taxes was partially offset by reduced operating costs at Red River and increased profit per ton at each of the project mines and Red River. Net income declined primarily due to the factors affecting income before taxes and a one-time cumulative effect charge recognized in the first quarter of 1999 as a result of a change in accounting for start-up costs. Royalty income continued to decline in 1999 compared with 1998 due to decreased demand for coal from NACoal's Eastern U.S. underground reserves. OTHER INCOME, EXPENSE AND INCOME TAXES The components of other income (expense) and the effective tax rate are as follows for the year ended December 31: 2000 1999 1998 ---- ---- ---- Interest expense Project mines ........ $ (16.9) $ (17.6) $ (13.0) Other mining operations .......... (.7) -- (.6) ------- ------- ------- $ (17.6) $ (17.6) $ (13.6) ======= ======= ======= Other-net Project mines ........ $ .4 $ .1 $ .7 Other mining operations .......... (.9) .3 .5 ------- ------- ------- $ (.5) $ .4 $ 1.2 ======= ======= ======= Effective tax rate .... (.7)% 19.1% 25.9% Interest expense from other mining operations increased in 2000 as compared with 1999 primarily due to increased debt levels to support the Phillips Acquisition. Interest expense at the project mines increased in 2000 and 1999 as compared with 1998 primarily due to additional interest charged to NACoal on advances from customers. In 2000, other-net from other mining operations includes a charge from the parent company of $1.0 million ($0.7 million after-tax) for fees incurred by NACCO on NACoal's behalf. The effective tax rate declined significantly in 2000 as compared with 1999 due to both the increased effect of percentage depletion and the resolution of certain tax issues provided for in prior years. The effective tax rate decline in 1999 as compared with 1998 is due to increasing amounts of percentage depletion eligible to reduce NACoal's effective tax rate. 28 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) LIQUIDITY AND CAPITAL RESOURCES In connection with the Phillips Acquisition, NACoal entered into a new financing agreement (the "NACoal Facility") which includes a revolving line of credit of up to $60.0 million and a term loan of $115.0 million. Prior to this agreement, NACoal's non-project-mining financing needs were provided by a $50.0 million revolving line of credit. Upon execution of the NACoal Facility, the $50.0 million line of credit was terminated and outstanding amounts were refinanced with proceeds from the NACoal Facility. The NACoal Facility requires annual term loan repayments of $15.0 million, with a final term loan repayment of $55.0 million in October 2005. The revolving credit facility of $60.0 million is available until the facility's expiration in October 2005. The NACoal Facility has performance-based pricing, which sets interest rates based upon achieving various levels of Debt to EBITDA ratios, as defined. The NACoal Facility establishes financial targets which must be satisfied before NACoal can make certain payments and dividends to NACCO or make significant investments. See further discussion of the terms of the NACoal Facility in Note 9 to the Consolidated Financial Statements. NACoal had $29.5 million of its $60.0 million revolving credit facility available at December 31, 2000. The financing of the project mining subsidiaries, which is either provided or guaranteed by the utility customers, includes long-term equipment leases, notes payable and advances from customers. The obligations of the project mining subsidiaries do not affect the short-term or long-term liquidity of NACoal and are without recourse to NACCO or NACoal. These arrangements allow the project mining subsidiaries to pay dividends to NACoal in amounts equal to their retained earnings. NACoal believes that funds available under its revolving credit agreement, operating cash flows and financing provided by the project mining subsidiaries' customers are sufficient to finance all of its term loan principal repayments and its operating needs and commitments arising during the foreseeable future. NACoal anticipates spending approximately $23.8 million for property, plant and equipment in 2001, of which $11.1 million relates to the development, establishment and improvement of the project mining subsidiaries' mines and is financed or guaranteed by the utility customers. Planned expenditures for 2001 include $11.2 million for the continued development of MLMC. The 2001 planned expenditures compare with capital expenditures of $19.2 million in 2000 and $12.7 million in 1999. Increased capital expenditures in 2000 as compared with 1999 primarily relate to project mine development of new mine areas and continued development at MLMC. Prior to the acquisition of the remaining 75 percent interest in MLMC on October 11, 2000, NACoal invested $8.9 million and $17.6 million, respectively, during 2000 and 1999 toward NACoal's 25 percent equity ownership interest in MLMC. NACoal's capital structure, excluding the project mining subsidiaries, is presented below: December 31 ------------------- 2000 1999 ------- ------- Investment in project mining subsidiaries ................ $ 3.8 $ 3.7 Other net tangible assets ........... 95.2 32.0 Coal supply agreement, net .......... 86.4 -- ------- ------- Net assets ........................ 185.4 35.7 Advances to (from) NACCO ............ (8.4) 2.7 Debt related to NACCO advances ........................... -- (2.7) Other debt .......................... (145.8) (12.5) ------- ------- Total debt ........................ (145.8) (15.2) ------- ------- Stockholder's equity ................ $ 31.2 $ 23.2 ======= ======= Debt to total capitalization ........ 82% 40% The increase in net assets of $149.7 million is primarily due to the Phillips Acquisition, which increased net assets by $143.8 million. The coal supply agreement is an identifiable intangible asset, valued by independent third-party appraisers, resulting from the Phillips Acquisition. Advances from NACCO, total debt and the related debt to total capitalization ratio also increased as a result of the Phillips Acquisition. 29 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) NACCO MATERIALS HANDLING GROUP NMHG, through NMHG Wholesale and NMHG Retail, designs, manufactures, sells and services forklift trucks and related service parts marketed worldwide under the Hyster(R) and Yale(R) brand names. In 1998, NMHG Retail began a strategy of acquiring retail dealerships on a permanent basis to strengthen Hyster's and Yale's positions in the lift truck business. Previously, NMHG Wholesale had purchased dealerships on a temporary basis, primarily for the purpose of strengthening the financial position of that dealership. See also Note 5 to the Consolidated Financial Statements for a discussion of retail acquisitions. NMHG Retail includes the elimination of intercompany revenues and profits resulting from sales by NMHG Wholesale to NMHG Retail. FINANCIAL REVIEW The segment and geographic results of operations for NMHG were as follows for the year ended December 31:
2000 1999 1998 -------- -------- -------- Revenues Wholesale Americas ............................................ $1,291.6 $1,149.5 $1,203.4 Europe, Africa and Middle East ...................... 394.6 406.3 453.9 Asia-Pacific ........................................ 63.8 63.1 57.5 -------- -------- -------- 1,750.0 1,618.9 1,714.8 -------- -------- -------- Retail (net of eliminations) Americas ............................................ 33.1 32.1 .1 Europe, Africa and Middle East ...................... 97.3 83.0 31.2 Asia-Pacific ........................................ 51.7 27.4 -- -------- -------- -------- 182.1 142.5 31.3 -------- -------- -------- NMHG Consolidated ................................... $1,932.1 $1,761.4 $1,746.1 ======== ======== ======== Operating profit (loss) Wholesale Americas ............................................ $ 85.9 $ 70.4 $ 103.8 Europe, Africa and Middle East ...................... 2.3 7.4 34.5 Asia-Pacific ........................................ (2.3) (3.3) (3.9) -------- -------- -------- 85.9 74.5 134.4 -------- -------- -------- Retail (net of eliminations) Americas ............................................ (.9) (3.9) -- Europe, Africa and Middle East ...................... (15.3) (10.6) (2.2) Asia-Pacific ........................................ .9 (1.7) -- -------- -------- -------- (15.3) (16.2) (2.2) -------- -------- -------- NMHG Consolidated ................................... $ 70.6 $ 58.3 $ 132.2 ======== ======== ======== Operating profit (loss) excluding goodwill amortization Wholesale Americas ............................................ $ 93.8 $ 78.2 $ 111.6 Europe, Africa and Middle East ...................... 5.7 11.0 38.0 Asia-Pacific ........................................ (2.0) (3.1) (3.6) -------- -------- -------- 97.5 86.1 146.0 -------- -------- -------- Retail (net of eliminations) Americas ............................................ (.8) (3.6) (.1) Europe, Africa and Middle East ...................... (14.7) (10.3) (2.0) Asia-Pacific ........................................ 1.2 (1.7) -- -------- -------- -------- (14.3) (15.6) (2.1) -------- -------- -------- NMHG Consolidated ................................... $ 83.2 $ 70.5 $ 143.9 ======== ======== ======== Net income (loss) (1) Wholesale ............................................ $ 37.0 $ 39.0 $ 77.2 Retail (net of eliminations) ......................... (15.7) (15.3) (2.1) -------- -------- -------- NMHG Consolidated ................................... $ 21.3 $ 23.7 $ 75.1 ======== ======== ========
(1) Intercompany eliminations and certain headquarters charges are not allocated to the geographic regions; therefore, net income (loss) by geographic region is not provided. 30 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) NMHG Revenues [BAR GRAPH]
Retail (net of eliminations) $ 31.3 $ 142.5 $ 182.1 Wholesale $1,589.6 $1,517.1 $1,714.8 $1,618.9 $1,750.0 1996 1997 1998 1999 2000
NMHG WHOLESALE 2000 COMPARED WITH 1999 The following schedule identifies the components of the changes in revenues, operating profit and net income for 2000 compared with 1999. Operating Net Revenues Profit Income -------- ------ ------ 1999 ....................... $1,618.9 $ 74.5 $ 39.0 Increase (decrease) in 2000 from: Unit volume ............... 148.7 23.8 15.5 Sales mix ................. 17.0 12.9 8.4 Average sales price ....... (.3) (.3) (.2) Service parts ............. 16.8 5.6 3.6 Foreign currency .......... (54.4) (9.9) (6.4) Manufacturing cost ........ -- 8.4 5.5 Other operating expense ... -- (15.2) (9.9) Other income (expense), net ........... -- -- (9.1) Difference between effective and statutory tax rates ...... -- -- (1.1) -------- -------- -------- $1,746.7 $ 99.8 $ 45.3 Freight reclassification .. 3.3 -- -- Restructuring charge ...... -- (13.9) (8.3) -------- -------- -------- 2000 ....................... $1,750.0 $ 85.9 $ 37.0 ======== ======== ======== Revenues increased as a result of unit and service parts volume growth, primarily in the Americas, and a shift in mix to higher revenue units, partially offset by adverse currency effects. Worldwide volume increased 11.5 percent to 84,825 units shipped during 2000 from 76,055 units shipped during 1999. Adverse currency effects on revenues resulted primarily from (i) translating a weakened British pound sterling into U.S. dollars and (ii) transactions denominated in a weakened euro as compared with the British pound sterling, which causes revenues that are invoiced in euros to decline when translated back to the British pound sterling. As previously discussed, NMHG Wholesale had a $34.6 million reclassification of freight. See the previous discussion of the year 2000 special items. Operating profit of $99.8 million, which excludes the restructuring charge, as a percentage of $1,746.7 million of revenues, which excludes the effect of the freight reclassification, was 5.7 percent in 2000. This percentage in 2000 compares with operating profit as a percentage of revenues in 1999 of 4.6 percent. Improved operating profit in 2000 as compared with 1999 is primarily due to (i) volume growth and related manufacturing efficiencies and (ii) a shift in the mix of products sold to higher margin units, partially offset by adverse currency effects in Europe. Including the restructuring charge and the freight reclassification, operating profit as a percentage of revenues was 4.9 percent in 2000. Excluding the restructuring charge, net income increased as a result of these factors. However, the increase was partially offset by an increase in other income (expense), net, which includes a $4.3 million after-tax charge from NACCO for services provided by the parent company and a decrease in equity in earnings of unconsolidated affiliates of $2.5 million, primarily due to losses for flood damages at a facility owned by Sumitomo -NACCO Materials Handling Group ("S-N"), a 50 percent-owned joint venture with Sumitomo Heavy Industries, Ltd. As announced on January 2, 2001, NMHG Wholesale plans to transfer manufacturing activities from its Danville, Illinois, plant to its other global manufacturing plants over a 12-to-18-month period. In December 2000, the Board of Directors approved management's plan to phase out its Danville, Illinois, lift truck assembly operations. This decision resulted in a charge to operations of approximately $11.7 million, relating to employee severance, medical and retirement costs, all accrued as a result of existing contractual obligations specified in collective bargaining agreements. In addition, an impairment charge of $2.2 million was recognized as a result of the anticipated disposition of certain assets at an amount below net book value. NMHG has decided to accelerate the transition of activities from Danville to its other manufacturing plants from a 12-to-18-month period, as previously disclosed in the Company's January 2, 2001 news release, to a 12-month period. As a result, NMHG's estimate of costs and benefits to be realized in 2001 and 2002 has been revised from the amounts previously disclosed in the Company's February 14, 2001 news release announcing 2000 fourth quarter earnings. The Company estimates that costs of $15.2 million will be recognized during 2001 and $2.4 million will be recognized during 2002 related to employee 31 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) benefits, relocation, plant reconfiguration and productivity losses during the transition of manufacturing activities from Danville, Illinois, to other manufacturing plants. These additional estimated costs have not been accrued as of December 31, 2000. As a result of anticipated improved manufacturing efficiencies from the phase-out plan, an estimated $12.0 million of cost savings is expected to be recognized during 2002. Annual benefits are estimated to be approximately $15.0 million beginning in 2003. In addition, capital expenditures of $14.8 million and $1.9 million are expected to be incurred during 2001 and 2002, respectively, relating to capacity expansions at other manufacturing plants. However, these estimates could change in the near term as new information becomes available during the phase-out period. See also discussion in Note 3 to the Consolidated Financial Statements. The backlog level increased to 21,800 units at December 31, 2000 from 21,500 units at December 31, 1999 primarily due to increased incoming orders in the Americas during 2000. The backlog level at December 31, 2000 has decreased slightly as compared to the level at September 30, 2000 of 22,600 units primarily due to an increase in unit shipments in the fourth quarter of 2000. 1999 COMPARED WITH 1998 The following schedule identifies the components of the changes in revenues, operating profit and net income for 1999 compared with 1998. Operating Net Revenues Profit Income -------- -------- -------- 1998 .......................... $1,714.8 $ 134.4 $ 77.2 Increase (decrease) in 1999 from: Unit volume .................. (29.0) (5.1) (3.3) Sales mix .................... (20.9) (12.4) (8.1) Average sales price .......... (33.2) (33.2) (21.6) Service parts ................ (1.0) (3.2) (2.1) Foreign currency ............. (11.8) (25.0) (16.3) Manufacturing cost ........... -- 4.9 3.2 Other operating expense ...... -- 14.1 9.2 Other income (expense), net .............. -- -- (1.0) Difference between effective and statutory tax rates ......... -- -- 1.8 -------- -------- -------- 1999 .......................... $1,618.9 $ 74.5 $ 39.0 ======== ======== ======== Revenues declined primarily due to reduced pricing, decreased volume and an unfavorable product mix. The average sales price declined, predominately in the Americas. Pricing deteriorated close to 3.0 percent in the Americas due to aggressive competition. In addition, unfavorable movements in the British pound sterling against the euro adversely affected European pricing. NMHG Wholesale's worldwide volume decreased 2.0 percent to 76,055 units shipped during 1999 from 77,636 units shipped during 1998. Unit volume decreased in both the Americas and Europe due to a decline in Hyster demand. Volumes in Asia-Pacific improved 10 percent in 1999 as compared with 1998. An unfavorable product mix negatively affected both revenues and operating profit due to increased sales of both lower-priced and lower-margin units. Operating profit declined from 7.8 percent of sales in 1998 to 4.6 percent of sales in 1999 primarily due to a reduction in the average sales price, adverse currency movements and an unfavorable sales mix. Adverse currency movements resulted from both (i) a strengthening of the Japanese yen against the U.S. dollar and the British pound sterling, resulting in increased costs of Japanese-sourced products, and (ii) adverse movements of the British pound sterling against European currencies, resulting in decreased margins on products manufactured in the United Kingdom and sold to other European countries. The decline in operating profit was somewhat offset by a reduction in manufacturing costs and other operating expenses. Manufacturing costs declined primarily due to favorable materials pricing. Other operating expenses declined primarily due to reduced variable compensation expense. Net income declined primarily as a result of these factors and a reduction in income from legal settlements of $2.4 million after-tax. NMHG RETAIL NMHG has continued to expand its retail organization through acquisitions since 1998. In 2000, NMHG Retail acquired four dealerships in Europe and one dealership in Asia-Pacific plus a new rental service company based in Australia with six locations throughout Australia. In addition, NMHG Retail acquired the assets of two dealerships in the Americas. NMHG will continue to evaluate expansion opportunities while maintaining a primary focus on strengthening the existing owned dealer network and the development of turnaround programs for under-performing wholly owned retail operations with the objective of curtailing losses in the Retail segment. 32 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) 2000 COMPARED WITH 1999 Revenues increased $39.6 million, or 27.8 percent, due to acquisitions of retail dealerships in Asia-Pacific and, to a lesser degree, Europe. Revenues from volume growth at comparable dealerships also contributed slightly to the increase in revenues but were entirely offset by adverse currency effects in Europe and an increase in the elimination of intercompany shipments from NMHG Wholesale to NMHG Retail. Operating results for 2000 in the Americas improved as compared with the prior year primarily due to a decrease in administrative support costs. Operating results for 2000 in Asia-Pacific improved as compared with the prior year primarily due to favorable operating results contributed by current year acquisitions. Increased net loss was driven by increased losses in Europe, primarily due to increased pricing competition as a result of a weak euro and due to continued integration, infrastructure, interest, amortization and administrative costs necessary to build the Retail segment. 2000 NMHG Revenues by Geographic Area [PIE GRAPH] [PIE GRAPH] Americas - 73% Americas - 18% Europe, Africa and Middle East - 23% Europe, Africa and Middle East - 54% Asia-Pacific - 4% Asia-Pacific - 28% WHOLESALE RETAIL (NET OF ELIMINATIONS) 1999 COMPARED WITH 1998 Comparison of NMHG Retail between 1999 and 1998 is not meaningful due to the significant number of acquisitions of retail dealerships throughout 1999 and 1998, with the exception of two retail dealerships. Revenues at these two comparable dealerships increased $4.8 million in 1999, while operating loss and net loss increased $3.1 million and $2.5 million, respectively. Increased revenues were primarily due to volume growth. Increased operating loss and net loss at these comparable dealerships was primarily due to reduced gross margins resulting primarily from price competition. Excluding the effect of comparable retail dealerships, revenues increased due to a full year of operating results from retail dealerships acquired in 1998 and the acquisition of 11 retail dealerships during 1999. Operating and net loss increased due to (i) operating losses at these newly acquired dealerships as a result of integration and start-up costs, (ii) increased interest and goodwill amortization expenses, and (iii) intercompany eliminations to defer profits on sales from NMHG Wholesale to NMHG Retail. NMHG CONSOLIDATED OTHER INCOME, EXPENSE AND INCOME TAXES The components of other income (expense) and the effective tax rate for NMHG are as follows for the year ended December 31: 2000 1999 1998 ---- ---- ---- Interest expense NMHG Wholesale ............ $(13.4) $(16.9) $(14.0) NMHG Retail ............... (4.6) (3.0) (1.2) NMHG Eliminations ......... (3.2) .9 1.2 ------ ------ ------ $(21.2) $(19.0) $(14.0) ====== ====== ====== Other-net NMHG Wholesale ............ $(12.0) $ 4.8 $ 3.4 NMHG Retail ............... .3 .5 -- NMHG Eliminations ......... (.1) (3.5) (1.2) ------ ------ ------ $(11.8) $ 1.8 $ 2.2 ===== ===== ====== Effective tax rate NMHG Wholesale ............ 40.7% 39.1% 37.9% NMHG Retail (including eliminations) . 31.4% 28.2% 38.2% NMHG Consolidated ......... 46.3% 44.8% 38.4% Interest expense increased in 2000, as compared with 1999 and 1998, primarily due to increased debt levels in 2000. Other-net for NMHG Wholesale includes charges from NACCO, equity in earnings of unconsolidated affiliates and discounts on the sale of accounts receivable. In 2000, other-net for NMHG Wholesale includes $6.6 million ($4.3 million after-tax) of charges from NACCO for services incurred on NMHG's behalf. Equity in the earnings (loss) of unconsolidated affiliates, including S-N, were ($0.2) million in 2000, $2.3 million in 1999 and $1.5 million in 1998. Discounts on the sale of receivables included in other-net were $5.5 million in 2000, $3.8 million in 1999 and $3.2 million in 1998. In 1999 and 1998, other-net for NMHG Wholesale included non-recurring income of $0.9 million and $4.6 million, respectively, for settlements from legal proceedings. 33 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) In 1998, the effective tax rate was reduced by a shift in income to jurisdictions with lower tax rates and the effect of a fixed amount of nondeductible goodwill amortization on an increased level of pre-tax income. In 2000 and 1999, however, the effective tax rate increased due to the effect of a fixed amount of nondeductible goodwill amortization on a decreased level of pre-tax income. LIQUIDITY AND CAPITAL RESOURCES NMHG Wholesale has a $350.0 million revolving credit facility (the "Facility") that expires in June 2002, but may be extended annually, for one-year periods, with the consent of the bank group. In addition, the Facility has performance-based pricing which sets interest rates based upon the achievement of certain financial performance targets. The Facility permits NMHG Wholesale to advance funds to NMHG Retail. Advances from NMHG Wholesale are the primary sources of financing for NMHG Retail. At December 31, 2000, NMHG Wholesale had available $115.0 million of its $350.0 million revolving credit facility. NMHG also has separate credit facilities totaling $66.4 million, of which $26.5 million was available at December 31, 2000, and maintains additional uncommitted lines of credit totaling $30.0 million, of which $6.0 million was available at December 31, 2000. In addition, NMHG Wholesale has entered into various agreements to sell certain accounts receivable on a revolving basis. See Note 6 to the Consolidated Financial Statements for further discussion. NMHG believes that funds available under its credit facilities and operating cash flows are sufficient to finance all of its operating needs and commitments arising during the foreseeable future. NMHG Wholesale anticipates spending approximately $62.7 million for property, plant and equipment in 2001, compared with capital expenditures of $43.3 million in 2000 and $44.7 million in 1999. NMHG Retail anticipates spending approximately $8.0 million for property, plant and equipment in 2001, compared with capital expenditures of $8.5 million in 2000 and $1.5 million in 1999. Planned expenditures in 2001 include manufacturing capacity expansion at existing facilities resulting from the phase-out of the Danville manufacturing plant, investments in worldwide information systems, tooling for new products and retail lease and rental fleet. The principal sources of financing for these capital expenditures are expected to be internally generated funds and facility borrowings. [GRAPH] NMHG'S Capital Expenditures Have Outpaced Depreciation Expense Capital Expenditures $42.3 $25.3 $63.9 $46.2 $51.8 Depreciation Expense $22.0 $23.0 $26.0 $41.7 $42.0 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- NMHG Wholesale's capital structure is presented below: December 31 -------------------------- 2000 1999 --------- --------- NMHG WHOLESALE Total net tangible assets ................$ 283.2 $ 270.4 Advances to NMHG Retail .................. 127.0 103.6 Advances to NACCO ........................ 3.0 10.0 Goodwill at cost ......................... 446.1 443.4 --------- --------- Net assets before goodwill amortization ............... 859.3 827.4 Accumulated goodwill amortization ............................ (129.6) (117.8) Total debt ............................... (277.8) (245.7) Minority interest ........................ (3.1) (4.1) --------- --------- Stockholder's equity .....................$ 448.8 $ 459.8 ========= ========= Debt to total capitalization ............. 38.% 35% The increase in total net tangible assets of $12.8 million is primarily due to a $30.1 million increase in current and long-term receivables, a $9.8 million increase in inventory and a $7.4 million increase in net deferred tax assets. This increase was partially offset by a $15.5 million increase in accounts payable and an $18.8 million increase in other current liabilities. The increases in accounts receivable, inventory and accounts payable are primarily due to volume growth in the Americas. Other current liabilities increased primarily due to the accrual for restructuring, and the deferred tax asset growth primarily relates to the deferred taxes established for the restructuring accrual. Total debt increased primarily to support additional advances to NMHG Retail. Stockholder's equity decreased primarily due to adverse currency movements recognized in the accumulated foreign currency translation adjustment and a dividend paid to NACCO, partially offset by net income. 34 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) NMHG Retail's capital structure is presented below: December 31 -------------------------- 2000 1999 --------- --------- NMHG RETAIL Total net tangible assets .............. $ 133.0 $ 123.3 Advances from NMHG Wholesale ............................. (127.0) (103.6) Goodwill at cost ....................... 44.2 35.3 --------- --------- Net assets before goodwill amortization ............. 50.2 55.0 Accumulated goodwill amortization .......................... (4.6) (1.4) Total debt ............................. (27.1) (25.0) --------- --------- Stockholder's equity ................... $ 18.5 $ 28.5 ========= ========= Debt to total capitalization ........... 59% 47% The increase in total net tangible assets of $9.7 million is primarily due to the acquisition of retail businesses in 2000, which increased net tangible assets by $28.9 million. This increase was partially offset by a $13.4 million decrease to property, plant and equipment due to sales of rental fleet and additional depreciation in 2000. Goodwill and advances from NMHG Wholesale have increased primarily due to acquisitions of retail dealerships during 2000. NACCO HOUSEWARES GROUP The Housewares segment of the Company includes HB-PS, a leading manufacturer and marketer of small electric motor and heat-driven appliances as well as commercial products for restaurants, bars and hotels, and KCI, a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. Because 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 to retailers and consumers increase significantly for the fall holiday selling season. FINANCIAL REVIEW The results of operations for Housewares were as follows for the year ended December 31: 2000 1999 1998 ------- ------ ------ Revenues .................... $ 649.9 $596.7 $537.6 Operating profit ............ $ 27.4 $ 41.8 $ 34.6 Operating profit excluding goodwill amortization ............. $ 30.5 $ 44.8 $ 37.6 Net income .................. $ 8.8 $ 21.2 $ 15.2 2000 COMPARED WITH 1999 The following schedule identifies the components of the changes in revenues, operating profit and net income for 2000 compared with 1999: Operating Net Revenues Profit Income ---------- --------- -------- [S] [C] [C] [C] 1999 $ 596.7 $ 41.8 $ 21.2 Increase (decrease) in 2000 from: Unit volume and sales mix ........................... 65.2 21.8 14.2 Average sales price .................. (17.0) (17.0) (11.1) Retail sales ......................... 5.0 (.1) -- Manufacturing cost ................... -- (16.0) (10.4) Other operating expense .............. -- (3.1) (2.0) Other income (expense), net ...................... -- -- (2.6) Difference between effective and statutory tax rates ................. -- -- (.5) -------- ------- ------- 2000 $ 649.9 $ 27.4 $ 8.8 ======== ======= ======= [GRAPH] Housewares Revenues $463.7 $495.8 $537.6 $596.7 $649.9 1996 1997 1998 1999 2000 [GRAPH] HB-PS Unit Volume (in millions) 29.6 33.4 36.6 39.4 43.3 1996 1997 1998 1999 2000 35 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) Housewares' revenues improved in 2000 primarily due to unit volume growth at HB-PS. Unit volume at HB-PS increased 9.9 percent to 43.3 million units sold in 2000 from 39.4 million units sold in 1999, primarily due to increased demand for contact grills, slow cookers and irons, and from initial shipments of GE-branded products to Wal*Mart, which began in August 2000. Revenues also increased at KCI primarily due to an increase in the number of stores. KCI operated 157 stores at December 31, 2000 compared with 150 stores at December 31, 1999. Housewares' gross profit declined to 18.4 percent of revenues in 2000 from 21.6 percent of revenues in 1999. This decline in gross profit is primarily due to decreased sales prices and increased manufacturing costs. The decline in the average sales price in 2000 as compared with 1999 was primarily due to intense competition. Increased manufacturing costs were driven by (i) increased materials costs, especially for petroleum-based resins and packaging materials, (ii) increased transportation costs driven by rising fuel costs and (iii) increased warehousing costs due to start-up inefficiencies at the new consolidated distribution center in Memphis. Increased manufacturing costs were partially offset by favorable Mexican peso exchange rates. Housewares' operating profit declined to 4.2 percent of revenues in 2000 from 7.0 percent of revenues in 1999. Operating profit declined due to the 3.2 percentage point decline in gross profit discussed above and due to an increase in administration costs at KCI, partially offset by a decline in direct marketing costs at HB-PS. Net income declined as a result of these factors combined with an increase in other income (expense), net, which increased primarily due to a $1.6 million after-tax charge from NACCO. [GRAPH] KCI Retail Stores 144 143 146 150 157 1996 1997 1998 1999 2000 1999 COMPARED WITH 1998 The following schedule identifies the components of the changes in revenues, operating profit and net income for 1999 compared with 1998: Operating Net Revenues Profit Income -------- ------ ------ [S] [C] [C] [C] 1998 $537.6 $34.6 $15.2 Increase (decrease) in 1999 from: Unit volume and sales mix .......................... 60.7 20.0 13.0 Average sales price ................. (7.1) (7.1) (4.6) Retail sales ........................ 5.5 .8 .6 Manufacturing cost .................. -- (2.1) (1.4) Other operating expense ............. -- (4.4) (2.9) Other income (expense), net ..................... -- -- .3 Difference between effective and statutory tax rates ................ -- -- 1.0 ------ ------ ----- 1999 $596.7 $41.8 $21.2 ====== ====== ===== Housewares' revenues improved in 1999 as compared with 1998 primarily due to unit volume growth at HB-PS. Unit volume at HB-PS increased 7.7 percent to 39.4 million units sold in 1999 from 36.6 million units sold in 1998 primarily due to increased demand for indoor grills, blenders, slow cookers and irons. Operating profit and net income increased during 1999 due to unit volume growth and a more profitable sales mix, partially offset by a decrease in the average sales price as a result of increased competition and an increase in manufacturing and other operating costs. Housewares' gross profit improved slightly in 1999 to 21.6 percent of revenues, up from 21.5 percent of revenues in 1998. Although the standard production cost of manufacturing declined during 1999 compared with 1998 as a result of increased production in lower-cost Mexican facilities, unfavorable manufacturing variances significantly reduced the benefits of utilizing these facilities in Mexico. Increased manufacturing variances were due to (i) continued start-up inefficiencies at HB-PS' Mexican facilities, (ii) the introduction of new product lines in Mexico and (iii) wind-down expenses at HB-PS' North Carolina plants. Manufacturing costs also increased due to increased transportation costs and additional start-up expenses associated with the new consolidated distribution center in Memphis. Increased manufacturing costs were partially offset by a decrease in employee severance of $2.0 million year-over-year and favorable Canadian exchange rates. 36 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) Housewares' operating profit improved in 1999 to 7.0 percent of revenues up from 6.4 percent of revenues in 1998. Other operating expenses, especially marketing, advertising and engineering expenses, increased to support sales growth. However, administrative costs, as a percent of revenues, decreased, especially at KCI. Retail sales at KCI increased as a result of both increases in the size of an average sales transaction and the number of customer transactions. Increased revenues at KCI contributed to increased operating profit and net income. KCI operated 150 stores at December 31, 1999, compared with 146 stores at December 31, 1998. OTHER INCOME, EXPENSE AND INCOME TAXES The components of other income (expense) and the effective tax rate are as follows for the year ended December 31: 2000 1999 1998 --------- --------- --------- Interest expense...............$ (8.6) $ (6.7) $ (7.0) Other-net ..................... (2.6) (.4) (.7) --------- --------- --------- $ (11.2) $ (7.1) $ (7.7) ========= ========= ========= Effective tax rate ............ 45.7% 38.9% 43.2% The increase in interest expense for 2000 as compared with 1999 and 1998 is due to both an increase in the average borrowings outstanding and an increase in interest rates. In 2000, other-net for Housewares includes $2.5 million ($1.6 million after-tax) of charges from NACCO for services incurred on Housewares' behalf. The increase in the effective tax rate in 2000 as compared with 1999 is primarily due to the effect of a constant level of nondeductible goodwill amortization on a lower comparable level of pre-tax income. The decrease in the effective tax rate for 1999 as compared with 1998 is primarily due to (i) the utilization of foreign tax credits resulting from the repatriation of foreign earnings previously taxed at a rate in excess of the U.S. statutory tax rate and (ii) the effect of a constant level of nondeductible goodwill amortization on a higher comparable level of pre-tax income. LIQUIDITY AND CAPITAL RESOURCES HB-PS' credit agreement provides for a revolving credit facility that: (i) provides financing up to $160.0 million, (ii) is secured by substantially all of HB?PS' assets, (iii) provides lower interest rates if HB-PS achieves certain interest coverage ratios, (iv) allows for interest rates quoted under a competitive bid option and (v) allows advances up to $10.0 million from HB-PS to KCI. Advances from HB-PS are the primary sources of financing for KCI. At December 31, 2000, HB-PS had $48.4 million available under this facility, which expires in May 2003. In addition, HB-PS has separate uncommitted facilities that permitted $29.7 million of additional borrowings at December 31, 2000. Housewares believes that funds available under its credit facilities and operating cash flows are sufficient to finance all of its operating needs and commitments arising during the foreseeable future. Housewares anticipates spending approximately $22.1 million for property, plant and equipment in 2001, compared with capital expenditures of $22.0 million in 2000 and $16.5 million in 1999. In 1999, HB-PS entered into an agreement to develop products sold to Wal*Mart under the GE brand name. Capital expenditures increased in 2000 as compared with 1999 primarily due to an additional $3.2 million of expenditures incurred related to the development of the GE-branded products. Planned expenditures for 2001 include additional development of the GE-branded products, tooling for new products and machinery and equipment, which are intended to reduce manufacturing costs and increase manufacturing efficiency. These expenditures are expected to be funded from internally generated funds and bank borrowings. Housewares' capital structure is presented below: December 31 --------------------------- 2000 1999 --------- --------- Total net tangible assets .............. $ 195.1 $ 183.4 Goodwill at cost ....................... 123.5 123.5 --------- --------- Net assets before goodwill amortization .............. 318.6 306.9 Accumulated goodwill amortization .......................... (36.7) (33.6) Total debt ............................. (111.0) (109.4) --------- --------- Stockholder's equity ................... $ 170.9 $ 163.9 ========= ========= Debt to total capitalization ........... 39% 40% Total net tangible assets increased $11.7 million primarily due to a $4.7 million increase in cash and a $5.2 million increase in inventory. Cash has increased primarily due to the timing of customer receipts at year-end versus vendor payments made after year-end. Inventory has increased primarily due to volume growth. [GRAPH] Housewares' Capital Expenditures Have Outpaced Depreciation Expense Capital Expenditures $16.2 $18.3 $16.8 $16.5 $22.0 Depreciation Expense $14.3 $15.4 $13.7 $14.5 $16.2 1996 1997 1998 1999 2000 37 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) NAACO AND OTHER FINANCIAL REVIEW NACCO and Other includes the parent company operations and Bellaire Corporation ("Bellaire"), a non-operating subsidiary of NACCO. Although Bellaire's operations are immaterial, it has significant long-term liabilities related to closed mines, primarily from former Eastern U.S. underground coal mining activities. Cash payments related to Bellaire's obligations, net of internally generated cash, are funded by NACCO and historically have not been material. The results of operations at NACCO and Other were as follows for the year ended December 31: 2000 1999 1998 --------- --------- --------- [S] [C] [C] [C] Revenues .................... $ .1 $ .1 $ .2 Operating loss .............. $ (11.7) $ (9.2) $ (10.7) Other income (expense), net ............. $ 4.4 $ (3.2) $ (.2) Extraordinary gain, net-of-tax ................. $ 29.9 $ -- $ -- Net income (loss) ........... $ 25.0 $ (8.3) $ (8.3) In 2000, NACCO and Other includes an extraordinary gain of $29.9 million, net of $16.1 million in taxes, related to an estimated decrease in Bellaire's obligation to UMWA. This obligation was initially recognized by Bellaire as an extraordinary charge in 1992 to accrue for the estimated costs associated with the Coal Act. See additional discussion in Note 4 to the Consolidated Financial Statements. Also in 2000, Bellaire recognized a $5.6 million increase to its closed mine reserves, with a corresponding decrease in other income (expense), net, related primarily to Black Lung and other retiree medical benefits, and to environmental obligations arising from former Eastern U.S. under-ground mining operations. See additional discussion in Note 3 to the Consolidated Financial Statements. In 2000, the parent company began charging fees for services provided to the operating subsidiaries. These fees, which totaled $10.1 million for the year ended December 31, 2000, are included in other income (expense), net. In 1999, other income (expense), net includes a charge of $2.9 million for the write-off of costs related to the potential acquisition of the forklift business of Nissan Motor Co., Ltd. LIQUIDITY AND CAPITAL RESOURCES Although NACCO's subsidiaries have entered into substantial borrowing agreements, NACCO has not guaranteed the long-term debt or any borrowings of its subsidiaries. The borrowing agreements at NMHG and Housewares, and the new financing facility at NACoal, allow for the payment to NACCO of dividends and advances under certain circumstances. Previously, there were no restrictions on the transfer of assets from NACoal. Dividends, advances and management fees from its subsidiaries are the primary sources of cash for NACCO. The Company believes that funds available under credit facilities, anticipated funds generated from operations and the utility customers' funding of the project mining subsidiaries are sufficient to finance all of its scheduled principal repayments, operating needs and commitments arising during the foreseeable future. NACCO's consolidated capital structure is presented below: December 31 ---------------------------- 2000 1999 ---------- ---------- Total net tangible assets ................. $ 688.1 $ 593.5 Coal supply agreement, net ................ 86.4 -- Goodwill at cost .......................... 613.8 602.2 ---------- ---------- Net assets before goodwill amortization .................. 1,388.3 1,195.7 Accumulated goodwill amortization ............................. (170.9) (152.8) Total debt, excluding current and long-term portion of obligations of project mining subsidiaries ............................. (561.7) (395.3) Closed mine obligations (Bellaire), including UMWA, net-of-tax ............... (45.1) (73.9) Minority interest ......................... (4.2) (11.5) ---------- ---------- Stockholders' equity ...................... $ 606.4 $ 562.2 ========== ========== Debt to total capitalization .............. 48% 41% The decrease in the minority interest liability is primarily due to NACoal's acquisition of the remaining 50 percent interest in Red River. 38 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) RECENTLY ISSUED ACCOUNTING STANDARDS The Company has not yet adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by Statements No. 137 and 138. A discussion of this new standard is included in Note 2 to the Consolidated Financial Statements. EFFECTS OF FOREIGN CURRENCY AND INFLATION NMHG and HB-PS operate internationally and enter into transactions denominated in foreign currencies. As a result, the Company is subject to the variability that arises from exchange rate movements. The effects of foreign currency on operating results at NMHG and HB-PS were discussed previously. The Company's use of foreign currency derivative contracts is discussed under the heading, "Quantitative and Qualitative Disclosures about Market Risk." The Company believes that overall inflation has not materially affected its results of operations in 2000 and 1999 and does not expect overall inflation to be a significant factor in 2001. ENVIRONMENTAL MATTERS The Company's manufacturing operations, like those of other companies engaged in similar businesses, involve the use, disposal and clean-up of substances regulated under environmental protection laws. The Company's NACoal subsidiary is affected 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, NACoal closely monitors 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 could result 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 the Company's financial condition or results of operations. EURO CONVERSION On January 1, 1999, 11 of the 15 countries that are members of the European Union introduced a new currency unit called the "euro," which will ultimately replace the national currencies of these 11 countries. The conversion rates between the euro and the participating nations' currencies were fixed irrevocably as of January 1, 1999, and participating national currencies will be removed from circulation between January 1, 2002 and June 30, 2002 and replaced by euro notes and coinage. During the "transition period" from January 1, 1999 through December 31, 2001, public and private entities as well as individuals may pay for goods and services using checks, drafts or wire transfers denominated either in the euro or the participating country's national currency. Under the regulations governing the transition to a single currency, there is a "no compulsion, no prohibition" rule which states that no one is obligated to use the euro until the notes and coinage have been introduced on January 1, 2002. In keeping with this rule, since January 1, 1999 the Company has also been able to (i) receive euro-denominated payments, (ii) invoice in euros and (iii) perform appropriate conversion and rounding calculations. Full conversion of all affected country operations to the euro is expected to be completed by the time national currencies are removed from circulation. The cost of software and business process conversion required to achieve such abilities has not yet been, and is not expected to be, material. 39 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) Excluding adverse affects caused by the weakening of the euro against the Company's functional currencies, the introduction of the euro, to date, has not had, and the Company does not anticipate that the continued use of the euro will have, a material effect on the Company's foreign exchange and hedging activities or the Company's use of derivative instruments, or a material adverse effect on operating results or cash flows. However, the ultimate effect of the euro on competition due to price transparency and foreign currency risk cannot yet be determined and may have an adverse effect, possibly material, on the Company's operations, financial position or cash flows. Conversely, introduction of the euro may also have positive effects, such as lower foreign currency risk and reduced prices of raw materials resulting from increased competition among suppliers. The Company continues to monitor and assess the potential risks imposed by the euro. OUTLOOK NACOAL NACoal expects increased lignite production in 2001 as MLMC begins its first year of operations. NACoal expects the Phillips Acquisition to add to earnings once the Red Hills power plant becomes fully operational, which is expected to occur in mid-2001. As a result of increasing demand for power and rising natural gas prices in the United States, NACoal anticipates an improved environment in the United States for new projects related to its undeveloped lignite reserves. In the fourth quarter of 2000, NACoal withdrew from two potential international projects, Konya Ilgin and Guney Ege in Turkey. However, NACoal expects to continue pursuing its participation in a mine-power plant project in India with NACoal's local partner, Reliance Industries. NMHG WHOLESALE AMERICAS: NMHG Wholesale expects lift truck shipments in the Americas to moderate in 2001, decreasing from the historically high levels in 2000. Anticipated pricing actions, lower product costs and manufacturing efficiencies are expected to have a positive effect on 2001 results. EUROPE: NMHG Wholesale expects lift truck demand in Europe to remain at high levels in the first part of 2001 and then to moderate as the year progresses. Although adverse currency rates improved marginally at the end of 2000, they are likely to continue negatively affecting both revenues and costs in 2001. ASIA-PACIFIC: NMHG Wholesale expects its lift truck business in the Asia-Pacific region to show modest growth as economic conditions continue to improve. A weak Australian dollar could continue to have a negative effect on the margins of trucks imported to Australia. NMHG RETAIL NMHG Retail expects to continue focusing on improving the performance of its wholly owned dealerships. Operating results for NMHG Retail are expected to improve in 2001. However, Europe is expected to continue incurring losses due primarily to competitive pricing pressures, a weak euro and planned investments in building a stronger retail dealer network. HOUSEWARES HB-PS expects revenue growth in 2001 primarily as a result of the introduction of additional GE-branded products sold to Wal-Mart and the introduction of a new line of Hamilton Beach(R) home environment products, including humidifiers, air purifiers and products that eliminate household odors. HB-PS anticipates that costs for petroleum-based resins will decline in 2001 after sharp price increases in 2000. HB-PS also expects to reduce inventory levels and improve manufacturing efficiency. KCI expects to continue focusing on improving store profitability and testing its new Gadgets & More(R) format through additional store openings. 40 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) The statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere throughout this Annual Report that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties which could cause actual results to differ materially from those presented in these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Such risks and uncertainties with respect to each subsidiary's operations include without limitation: NACOAL: (1) weather conditions and other events that would change the level of customers' fuel requirements, (2) weather or equipment problems that could affect lignite deliveries to customers, (3) increased maintenance, fuel or other similar costs, (4) costs to pursue international opportunities and (5) delays in lignite production at the Red Hills mine or delays in the start-up of the Red Hills power plant. NMHG: (1) changes in demand for lift trucks and related service parts on a worldwide basis, (2) changes in sales prices, (3) delays in delivery or increased costs of raw materials or sourced products and labor, (4) delays in manufacturing and delivery schedules, (5) exchange rate fluctuations, changes in foreign import tariffs and monetary policies and other changes in the regulatory climate in the foreign countries in which NMHG operates and/or sells products, (6) delays in or increased costs of the Danville, Illinois, manufacturing plant phase-out, (7) product liability or other litigation, warranty claims or other returns of products, (8) ability to acquire dealerships acceptable to NMHG, (9) costs related to the integration of acquisitions and (10) increased competition, foreign currency exchange movements and/or changes in operating costs attributable to the euro. HOUSEWARES: (1) changes in the sales prices, product mix or levels of consumer purchases of kitchenware and small electric appliances, (2) bankruptcy of or loss of major retail customers or suppliers, (3) increased costs of raw materials, including petroleum-based resins used in manufacturing, or sourced products, (4) exchange rate fluctuations, changes in the foreign import tariffs and monetary policies and other changes in the regulatory climate in the foreign countries in which HB-PS buys, operates and/or sells products, (5) product liability, regulatory reviews or other litigation, warranty claims or returns of products, (6) increased competition, (7) increased costs or delays in the development of the GE-branded products to be sold to Wal*Mart and new home environment products and (8) weather conditions or further increases in gasoline prices that would affect the number of customers visiting Kitchen Collection stores. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK The Company's subsidiaries, NMHG, HB-PS and NACoal, have entered into certain financing arrangements that require interest payments based on floating interest rates. As such, the Company's financial results are subject to changes in the market rate of interest. To reduce the exposure to changes in the market rate of interest, the Company has entered into interest rate swap agreements for a significant portion of its floating rate financing arrangements. The Company does not enter into interest rate swap agreements for trading purposes. Terms of the interest rate swap agreements require the subsidiaries to receive a variable interest rate and pay a fixed interest rate. See also Note 2 and Note 14 to the Consolidated Financial Statements. For purposes of specific risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in interest rates. Assuming a hypothetical 10 percent decrease in the interest rates as of December 31, 2000 and 1999, the fair market value of interest rate sensitive financial instruments, which primarily represents interest rate swap agreements, would decline by $5.4 million and $2.3 million, respectively, as compared with their fair market value at December 31, 2000 and 1999, respectively. 41 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data) FOREIGN CURRENCY EXCHANGE RATE RISK NMHG and HB-PS operate internationally and enter into transactions denominated in foreign currencies. As such, their financial results are subject to the variability that arises from exchange rate movements. NMHG and HB-PS use forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies and not for trading purposes. These contracts mature within one year and require the companies to buy or sell Japanese yen, Australian dollars, Canadian dollars, Mexican pesos or various European currencies for the functional currency in which the applicable subsidiary operates at rates agreed to at the inception of the contracts. See also Note 2 and Note 14 to the Consolidated Financial Statements. For purposes of specific risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in foreign currency exchange rates. Assuming a hypothetical 10 percent strengthening of the U.S. dollar as compared with other foreign currencies at December 31, 2000 and 1999, the fair market value of foreign currency-sensitive financial instruments, which primarily represents forward foreign currency exchange contracts, would decline by $4.7 million and $1.4 million, respectively, as compared with their fair market value at December 31, 2000 and 1999, respectively. It is important to note that the loss in fair market value indicated in this sensitivity analysis would be somewhat offset by changes in the fair market value of the underlying receivables, payables and net investments in foreign subsidiaries. COMMODITY PRICE RISK The Company uses certain commodities, including steel, resins, linerboard and diesel fuel, in the normal course of its mining and manufacturing processes. As such, the cost of operations is subject to variability as the market for these commodities change. The Company monitors this risk and, from time to time, enters into derivative contracts to hedge this risk. The Company does not currently have any such derivative contracts outstanding, nor does the Company have any significant purchase obligations to obtain fixed quantities of commodities in the future. MARKET FOR NACCO INDUSTRIES, INC. COMMON STOCK AND RELATED SECURITY HOLDERS' MATTERS NACCO Industries, Inc. Class A common stock is traded on the New York Stock Exchange under the ticker symbol 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 common stock for each quarter during the past two years are presented in the table below: 2000 -------------------------------------------- Sales Price ------------------ Cash High Low Dividend ------ -------- ----------- FIRST QUARTER ........... $55.75 $39.50 21.50 cents SECOND QUARTER .......... $51.25 $33.56 22.50 cents THIRD QUARTER ........... $47.50 $34.25 22.50 cents FOURTH QUARTER .......... $44.50 $35.63 22.50 cents 1999 -------------------------------------------- Sales Price ------------------ Cash High Low Dividend ------ -------- ----------- First Quarter ........... $97.00 $70.50 20.50 Cents Second Quarter .......... $93.50 $66.88 21.50 Cents Third Quarter ........... $89.00 $65.75 21.50 Cents Fourth Quarter .......... $73.63 $44.50 21.50 Cents At December 31, 2000, there were approximately 500 Class A common stockholders of record and 400 Class B common stockholders of record. [GRAPH] NACCO Cash Dividends Per Share $0.74 $0.77 $0.81 $0.85 $0.89 1996 1997 1998 1999 2000 42 21 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME NACCO Industries, Inc. and Subsidiaries
Year Ended December 31 ----------------------------------- 2000 1999 1998 --------- --------- --------- (In millions, except per share data) Revenues ..................................................................... $ 2,871.3 $ 2,635.9 $ 2,569.3 Cost of sales ................................................................ 2,355.1 2,151.2 2,053.8 --------- --------- --------- GROSS PROFIT ................................................................. 516.2 484.7 515.5 Selling, general and administrative expenses ................................. 367.0 337.0 301.1 Amortization of goodwill ..................................................... 15.7 15.2 14.7 Restructuring charges ........................................................ 15.6 1.2 1.6 --------- --------- --------- OPERATING PROFIT ............................................................. 117.9 131.3 198.1 Other income (expense) Interest expense ......................................................... (47.1) (43.3) (34.6) Closed mine obligations .................................................. (5.6) -- -- Other-net ................................................................ (5.2) (1.4) 2.5 --------- --------- --------- (57.9) (44.7) (32.1) --------- --------- --------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST, EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ............................... 60.0 86.6 166.0 Provision for income taxes ................................................... 22.3 31.7 60.7 --------- --------- --------- INCOME BEFORE MINORITY INTEREST, EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ............................... 37.7 54.9 105.3 Minority interest income (expense) .......................................... .1 (.6) (3.0) --------- --------- --------- INCOME BEFORE EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ........................................................ 37.8 54.3 102.3 Extraordinary gain, net of $16.1 tax expense ................................. 29.9 -- -- --------- --------- --------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ......................... 67.7 54.3 102.3 Cumulative effect of accounting change, net of $0.6 tax benefit .............. -- (1.2) -- --------- --------- --------- NET INCOME ................................................................... $ 67.7 $ 53.1 $ 102.3 ========= ========= ========= Other comprehensive income (loss) Foreign currency translation adjustment .................................. $ (15.8) $ (11.9) $ 3.6 Minimum pension liability adjustment, net of: ($1.0) tax benefit in 2000; $2.3 tax expense in 1999; ($1.4) tax benefit in 1998 ................ (1.4) 3.8 (2.4) --------- --------- --------- (17.2) (8.1) 1.2 --------- --------- --------- COMPREHENSIVE INCOME ......................................................... $ 50.5 $ 45.0 $ 103.5 ========= ========= ========= BASIC EARNINGS PER SHARE Income Before Extraordinary Gain and Cumulative Effect of Accounting Change ........................................................ $ 4.63 $ 6.67 $ 12.56 Extraordinary gain, net-of-tax ............................................... 3.66 -- -- Cumulative effect of accounting change, net-of-tax ........................... -- (.15) -- --------- --------- --------- Net Income ................................................................... $ 8.29 $ 6.52 $ 12.56 ========= ========= ========= DILUTED EARNINGS PER SHARE Income Before Extraordinary Gain and Cumulative Effect of Accounting Change ........................................................ $ 4.63 $ 6.66 $ 12.53 Extraordinary gain, net-of-tax ............................................... 3.66 -- -- Cumulative effect of accounting change, net-of-tax ........................... -- (.15) -- --------- --------- --------- Net Income ................................................................... $ 8.29 $ 6.51 $ 12.53 ========= ========= =========
See Notes to Consolidated Financial Statements. 43 22 CONSOLIDATED BALANCE SHEETS NACCO Industries, Inc. and Subsidiaries
December 31 -------------------- 2000 1999 -------- -------- (In millions, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents ........................................................... $ 33.7 $ 36.2 Accounts receivable, net of allowances of $16.8 in 2000 and $16.7 in 1999 .......... 315.4 292.2 Inventories ......................................................................... 411.8 390.3 Prepaid expenses and other .......................................................... 54.8 53.5 -------- -------- 815.7 772.2 PROPERTY, PLANT AND EQUIPMENT, NET ....................................................... 710.7 625.4 DEFERRED CHARGES Goodwill, net ....................................................................... 442.9 449.4 Coal supply agreement, net .......................................................... 86.4 -- Deferred costs and other ............................................................ 62.1 66.7 Deferred income taxes ............................................................... 12.8 29.2 -------- -------- 604.2 545.3 OTHER ASSETS ............................................................................. 63.3 70.1 -------- -------- TOTAL ASSETS .................................................................... $2,193.9 $2,013.0 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable .................................................................... $ 263.0 $ 254.4 Revolving credit agreements ......................................................... 66.3 56.6 Current maturities of long-term debt ................................................ 45.4 12.5 Current obligations of project mining subsidiaries .................................. 37.7 39.3 Accrued payroll ..................................................................... 53.2 47.0 Accrued warranty obligations ........................................................ 37.0 36.0 Other current liabilities ........................................................... 147.6 137.3 -------- -------- 650.2 583.1 LONG-TERM DEBT - not guaranteed by the parent company .................................... 450.0 326.3 OBLIGATIONS OF PROJECT MINING SUBSIDIARIES - not guaranteed by the parent company or its NACoal subsidiary ....................... 282.7 289.2 SELF-INSURANCE RESERVES AND OTHER ........................................................ 200.4 240.7 MINORITY INTEREST ........................................................................ 4.2 11.5 STOCKHOLDERS' EQUITY Common stock: Class A, par value $1 per share, 6,529,143 shares outstanding (1999 - 6,509,450 shares outstanding) ..................................... 6.5 6.5 Class B, par value $1 per share, convertible into Class A on a one-for-one basis, 1,641,937 shares outstanding (1999 - 1,647,428 shares outstanding) ........ 1.6 1.6 Capital in excess of par value ...................................................... 3.6 2.7 Retained earnings ................................................................... 614.9 554.4 Accumulated other comprehensive loss: Foreign currency translation adjustment ......................................... (18.8) (3.0) Minimum pension liability adjustment ............................................ (1.4) -- -------- -------- 606.4 562.2 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................................... $2,193.9 $2,013.0 ======== ========
See Notes to Consolidated Financial Statements 44 23 CONSOLIDATED STATEMENTS OF CASH FLOWS NACCO Industries, Inc. and Subsidiaries
Year Ended December 31 -------------------------- 2000 1999 1998 ------ ------ ------ (In millions) OPERATING ACTIVITIES Net income ............................................................. $ 67.7 $ 53.1 $102.3 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization ........................... 106.1 104.0 89.0 Deferred income taxes .............................................. (12.5) 3.3 (13.2) Minority interest (income) expense ................................. (.1) .6 3.0 Cumulative effect of accounting change ............................. -- 1.2 -- Extraordinary gain ................................................. (29.9) -- -- Restructuring charges .............................................. 15.6 1.2 1.6 Other non-cash items ............................................... .1 (2.9) 5.6 Working capital changes, excluding the effect of business acquisitions: Accounts receivable ................................................ (24.9) (11.3) (11.5) Inventories ........................................................ (26.0) (23.0) (32.7) Other current assets ............................................... 1.2 (12.4) .3 Accounts payable and other liabilities ............................. 35.7 15.3 (.1) ------ ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES ...................... 133.0 129.1 144.3 ------ ------ ------ INVESTING ACTIVITIES Expenditures for property, plant and equipment ......................... (93.3) (75.5) (100.3) Proceeds from the sale of property, plant and equipment ................ 15.3 1.0 4.8 Acquisitions of businesses, net of cash acquired ....................... (145.3) (62.4) (16.6) Investments in unconsolidated affiliates ............................... (10.3) (15.9) (10.5) Acquisition of minority interest ....................................... -- (11.3) -- Other-net .............................................................. (.6) 2.7 .8 ------ ------ ------ NET CASH USED FOR INVESTING ACTIVITIES ......................... (234.2) (161.4) (121.8) ------ ------ ------ FINANCING ACTIVITIES Additions to long-term debt and revolving credit agreements ............ 186.0 90.2 39.6 Reductions of long-term debt and revolving credit agreements ........... (61.7) (9.1) (27.5) Additions to obligations of project mining subsidiaries ................ 53.7 31.6 59.8 Reductions of obligations of project mining subsidiaries ............... (70.3) (58.8) (74.5) Deferred financing fees ................................................ (1.8) -- -- Financing of other short-term obligations .............................. -- (17.2) (3.9) Stock repurchases ...................................................... -- -- (4.7) Cash dividends paid .................................................... (7.2) (7.0) (6.6) Capital grants ......................................................... .4 2.6 1.2 Other-net .............................................................. (.8) 3.0 4.5 ------ ------ ------ NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES ........... 98.3 35.3 (12.1) ------ ------ ------ Effect of exchange rate changes on cash ................................ .4 (1.5) .2 ------ ------ ------ CASH AND CASH EQUIVALENTS Increase (decrease) for the year ....................................... (2.5) 1.5 10.6 Balance at the beginning of the year ................................... 36.2 34.7 24.1 ------ ------ ------ BALANCE AT THE END OF THE YEAR ......................................... $ 33.7 $ 36.2 $ 34.7 ====== ====== ======
See Notes to Consolidated Financial Statements. 45 24 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY NACCO Industries, Inc. and Subsidiaries
Year Ended December 31 -------------------------- 2000 1999 1998 ------ ------ ------ (In millions, except per share data) CLASS A COMMON STOCK Beginning balance ..................................... $ 6.5 $ 6.5 $ 6.5 Purchase of treasury shares ........................... -- -- (.1) Other ................................................. -- -- .1 ------ ------ ------ 6.5 6.5 6.5 ------ ------ ------ CLASS B COMMON STOCK ....................................... 1.6 1.6 1.6 ------ ------ ------ CAPITAL IN EXCESS OF PAR VALUE Beginning balance ..................................... 2.7 .2 .1 Shares issued under stock option and compensation plans .9 2.5 1.0 Purchase of treasury shares ........................... -- -- (.9) ------ ------ ------ 3.6 2.7 .2 ------ ------ ------ RETAINED EARNINGS Beginning balance ..................................... 554.4 504.9 412.9 Net income ............................................ 67.7 53.1 102.3 Reconsolidation of Brazilian subsidiary ............... -- 3.4 -- Purchase of treasury shares ........................... -- -- (3.7) Cash dividends on Class A and Class B common stock: 2000 $.890 per share ......................... (7.2) -- -- 1999 $.850 per share ......................... -- (7.0) -- 1998 $.810 per share ......................... -- -- (6.6) ------ ------ ------ 614.9 554.4 504.9 ------ ------ ------ ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Beginning balance ..................................... (3.0) 5.1 3.9 Foreign currency translation adjustment ............... (15.8) (11.9) 3.6 Minimum pension liability adjustment, net-of-tax ...... (1.4) 3.8 (2.4) ------ ------ ------ (20.2) (3.0) 5.1 ------ ------ ------ TOTAL STOCKHOLDERS' EQUITY ........................ $606.4 $562.2 $518.3 ====== ====== ======
See Notes to Consolidated Financial Statements. 46 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 1 - PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS The Consolidated Financial Statements include the accounts of NACCO Industries, Inc. ("NACCO," the parent company) and its wholly owned subsidiaries (NACCO Industries, Inc. and Subsidiaries - the "Company"). Intercompany accounts and transactions are eliminated. The Company's subsidiaries operate in three principal industries: lift trucks, housewares and lignite mining. The Company manages its subsidiaries by industry; however, the Company segments its lift truck operations into two components: wholesale manufacturing and retail distribution. NMHG Holding Co., through its wholly owned subsidiaries, NACCO Materials Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG Retail") (collectively "NMHG") designs, engineers, manufactures, sells and services a full line of lift trucks and service parts marketed worldwide under the Hyster(R) and Yale(R) brand names. NMHG Wholesale includes the manufacture and sale of lift trucks and related service parts, primarily to independent and wholly owned Hyster and Yale retail dealerships. NMHG Retail includes the sale and service of Hyster and Yale lift trucks and related service parts by wholly owned retail dealerships. The sale of service parts represents approximately 19 percent, 17 percent and 17 percent of the total NMHG revenues as reported for 2000, 1999 and 1998, respectively. NACCO Housewares Group ("Housewares") consists of Hamilton Beach?Proctor-Silex, Inc. ("HB?PS"), a leading manufacturer and marketer of small electric motor and heat-driven appliances as well as commercial products for restaurants, bars and hotels, and The Kitchen Collection, Inc. ("KCI"), a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. The North American Coal Corporation ("NACoal") mines and markets lignite primarily as fuel for power providers. In 1989, NMHG acquired a majority interest in Hyster Brasil, Ltda., a Brazilian manufacturer and marketer of Hyster forklift trucks and related service parts. In 1990, NMHG deconsolidated this subsidiary because it did not have effective control, given the uncertain economic and political environment in Brazil at that time. The continued stability of the economic environment in Brazil, the ability to receive dividends during the last few years and the Company's planned expansion of operations in Brazil led management to reassess its ability to influence the performance of Hyster Brasil, Ltda. In 1999, NMHG determined that it has significant influence over Hyster Brasil, Ltda. and therefore it is appropriate to consolidate its operations. Undistributed earnings during the periods of deconsolidation, when NMHG did not have effective control, have been credited directly to consolidated retained earnings in the amount of $3.4 million at December 31, 1999. The consolidation of Hyster Brasil, Ltda. as of December 31, 1999 was not material to the Company's financial position or results of operations. During 2000, NMHG continued to consolidate this subsidiary, and the Company will periodically assess NMHG's ability to control the operations of Hyster Brasil, Ltda. NOTE 2 - ACCOUNTING POLICIES USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities (if any) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 (LIFO) method for manufactured inventories in the United States and for certain retail inventories. The first-in, first-out (FIFO) method is used 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. Buildings are depreciated using a 40-year life or, at NACoal, over the life of the mines 47 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) which range from 9 to 43 years. Estimated lives for machinery and equipment range from 3 to 12 years and for land and building improvements from 5 to 40 years. The units-of-production method is used to amortize certain coal-related assets based on estimated recoverable tonnages. GOODWILL: Goodwill represents the excess purchase price paid over the fair value of the net assets acquired. The amortization of goodwill is provided on a straight-line basis generally over a 40-year period. Accumulated amortization of goodwill was $170.9 million and $152.8 million at December 31, 2000 and 1999, respectively. Management regularly evaluates its accounting for goodwill, considering such factors as historical and future profitability, and believes that these assets are realizable and the amortization periods remain appropriate. SELF-INSURANCE RESERVES: The Company is generally self-insured for product liability, environmental liability, medical and workers' compensation claims, certain closed mine liabilities and obligations to the United Mine Workers of America Combined Benefit Fund ("UMWA") arising as a result of the Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"). For product liability, catastrophic coverage is retained for potentially significant individual claims. An estimated provision for claims reported and for claims incurred but not yet reported under the self-insurance programs is recorded and revised annually based on industry trends, historical experience and management judgment. Changes in assumptions for such matters as legal actions, inflation rates, medical costs and actual experience could cause estimates to change in the near term. REVENUE RECOGNITION: Revenues are generally recognized when customer orders are completed and shipped. Reserves for discounts, returns and product warranties are maintained for anticipated future claims. ADVERTISING COSTS: Advertising costs are expensed as incurred and amounted to $24.3 million, $25.5 million and $22.6 million in 2000, 1999 and 1998, respectively. 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 $51.8 million, $48.0 million and $44.1 million in 2000, 1999 and 1998, respectively. FOREIGN CURRENCY: Assets and liabilities of foreign operations are translated into U.S. dollars at the fiscal year-end exchange rate. The related translation adjustments are recorded as a separate component of stockholders' equity, except for the Company's Mexican operations. The U.S. dollar is considered the functional currency for the Company's Mexican operations and, therefore, the effect of translating assets and liabilities from the Mexican peso to the U.S dollar is recorded in the Consolidated Statements of Income and Comprehensive Income. Revenues and expenses of all foreign operations are translated using the monthly average exchange rates prevailing during the year. FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS: Financial instruments held by the Company include cash and cash equivalents, accounts receivable, accounts payable, revolving credit agreements, long-term debt, interest rate swap agreements and forward foreign currency exchange contracts. The Company does not hold or issue financial instruments or derivative financial instruments for trading purposes. The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. These contracts hedge primarily firm commitments and, to a lesser degree, forecasted transactions relating to cash flows associated with sales and purchases denominated in currencies other than the subsidiaries' functional currency. Generally, gains and losses from changes in the market value of these contracts are recognized in cost of sales and offset the foreign exchange gains and losses on the underlying transactions. The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements which are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company's interest rate swap agreements and its variable rate financings are predominately based upon the three-month LIBOR (London Interbank Offered Rate). Amounts to be paid or received under the interest rate swap agreements are accrued as interest rates change and are recognized over the life of the swap agreement as an adjustment to interest expense. The related amounts payable to, or receivable from, the counterparties are included in other current liabilities. Changes in the market value of the interest rate swap agreements are not recognized in net income. However, in the event that the underlying debt is extinguished, changes in the market value of interest rate swap agreements that could 48 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) not be designated as hedges of other assets, liabilities or anticipated transactions would be recognized in net income over the remaining life of the contract or upon termination of the contract. NEW ACCOUNTING STANDARDS: In September 2000, the Emerging Issues Task Force ("EITF") reached a consensus on Issue Number 00-10, "Accounting for Shipping and Handling Fees and Costs" ("EITF 00-10"), which requires shipping and handling amounts billed to a customer to be classified as revenue. In addition, the EITF's preference is to classify shipping and handling costs as "cost of sales." For certain shipping and handling fees, the Company netted the charge to the customer with the cost incurred within its Consolidated Statements of Income and Comprehensive Income on the line "cost of sales." In the fourth quarter of 2000, the Company changed its method of reporting to comply with EITF 00-10. The Company restated its revenues and cost of sales for the first three quarters of 2000 and the fiscal years ended December 31, 1999 and 1998, resulting in an increase to both revenues and cost of sales of approximately $36.4 million, $33.1 million and $33.1 million, respectively. This restatement does not affect the reported amounts of gross profit. On December 3, 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 - Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes certain of the SEC staff's views in applying generally accepted accounting principals to revenue recognition in financial statements. The Company has reviewed its revenue recognition policies and procedures and believes that it has complied with the requirements of SAB 101. No significant changes to the Company's revenue recognition policies were necessary to comply with SAB 101. As of January 1, 1999, the Company adopted the American Institute of Certified Public Accountants' ("AICPA") Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," and SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-1 requires capitalization on a prospective basis of certain development costs of software to be used internally. The Company does not expect the change to this new accounting standard to have a material impact on its financial position or results of operations in the foreseeable future. SOP 98-5 requires start-up and organization costs to be expensed as incurred and also requires previously deferred start-up costs to be recognized as a cumulative effect adjustment in the statement of income upon adoption. Prior to January 1, 1999, the Company's NACoal subsidiary had deferred certain start-up costs related to the development of lignite mining activities and amortized these costs over the estimated useful lives of the related coal lands. Under the new accounting standard, these costs--primarily training, travel and administrative expenses--are no longer allowed to be deferred, but, rather, must be expensed as incurred. Therefore, the Company has recognized the effect of expensing these previously deferred start-up costs of $1.2 million, net-of-tax, as a cumulative effect of accounting change in the accompanying Consolidated Statement of Income and Comprehensive Income for the year ended December 31, 1999. ACCOUNTING STANDARDS NOT YET ADOPTED: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires companies to recognize all derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. In June 1999, the FASB issued SFAS No. 137, which delayed the effective date of SFAS No. 133 for one year to fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." This Statement amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and hedging activities. The Company adopted these Statements on January 1, 2001 and the adoption did not have a material effect on its financial statements. RECLASSIFICATIONS: Certain amounts in the prior periods' Consolidated Financial Statements have been reclassified to conform to the current period's presentation. 49 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 3 - SPECIAL CHARGES RESTRUCTURING CHARGES NMHG: During 2000, NMHG made the determination that consolidation of the Americas' truck assembly activities from a three-plant to a two-plant structure offers significant opportunity to reduce structure costs while further optimizing the use of NMHG's global manufacturing capacity. Accordingly, a decision was made to phase out manufacturing activities in the Danville, Illinois, assembly plant. In December 2000, the Board of Directors approved management's plan to transfer manufacturing activities from NMHG's Danville plant to its other global manufacturing plants. The adoption of this plan resulted in a charge to operations of approximately $11.7 million, relating to retirement costs, medical costs and employee severance to be paid to approximately 425 manufacturing and office personnel. All costs were accrued as a result of existing contractual obligations. In connection with the phase-out of activities at the Danville, Illinois, assembly plant, NMHG recognized an impairment charge of $2.2 million in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The impairment charge relates to certain fixed assets and leasehold improvements that will either be disposed of or sold at fair market value, which is estimated to be below the net book value. Fair market value was estimated using current market values for similar assets. The Company estimates that additional costs of $15.2 million will be recognized during 2001 and $2.4 million will be recognized during 2002 related to employee benefits, relocation, plant reconfiguration and productivity losses during the transition of manufacturing activities from Danville, Illinois, to other manufacturing plants. These additional estimated costs have not been accrued as of December 31, 2000. As a result of anticipated improved manufacturing efficiencies from the phase-out plan, an estimated $12.0 million of cost savings is expected to be recognized during 2002. Annual benefits are estimated to be approximately $15.0 million beginning in 2003. However, these estimates could change in the near term as new information becomes available during the phase-out period. In 1997, NMHG recognized a restructuring charge of $8.0 million, primarily related to employee severance and lease termination costs incurred in conjunction with the consolidation of certain engineering, marketing and administrative functions within the NMHG organization. In 1998, NMHG substantially completed this restructuring plan and reversed $2.2 million of the severance accrual due to the higher-than-anticipated number of employees willing to relocate. Higher relocation expenses not considered part of the restructuring accrual offset this reversal. Final payments related to this restructuring plan were made in early 1999. HOUSEWARES: In 2000, 1999 and 1998, HB-PS recognized an accrual for employee severance and related costs of $0.5 million for 40 manufacturing employees, $1.2 million for 130 manufacturing employees and $3.2 million for 450 manufacturing employees, respectively, in connection with transitioning activities to HB-PS' Mexican facilities. During 2000 and 1999, payments of $2.5 million to approximately 225 employees and $1.7 million to approximately 350 employees, respectively, have been made. See also the table below for detail of the employee severance accrual activity during this transition period. The Company anticipates that payments relating to these severance programs will be finalized during the first half of 2001. In 2000, HB-PS recognized an impairment charge of $1.2 million in accordance with SFAS No. 121 related to certain assets that will be disposed as a result of the transitioning of activities from manufacturing facilities in the United States to manufacturing facilities in Mexico. The changes to the Company's restructuring accruals are as follows: KNMHG HB-PS ---------------- ------------------- Employee Employee Impairment Benefits Other Benefits Charge Total -------- ----- -------- ------ ----- Balance at December 31, 1997 ........ $ 5.9 $ 1.0 $ -- $ -- $ 6.9 Provision (reversal) .... (2.2) .6 3.2 -- 1.6 Payments ................. (3.3) (1.6) -- -- (4.9) ----- ----- ----- ----- ----- Balance at December 31, 1998 ........ $ .4 $ -- $ 3.2 $ -- $ 3.6 Provision ................ -- -- 1.2 -- 1.2 Payments ................. (.4) -- (1.7) -- (2.1) ----- ----- ----- ----- ----- Balance at December 31, 1999 ........ $ -- $ -- $ 2.7 $ -- $ 2.7 Provision ................ 11.7 2.2 .5 1.2 15.6 Payments ................. -- -- (2.5) -- (2.5) ----- ----- ----- ----- ----- BALANCE AT DECEMBER 31, 2000 ........ $11.7 $ 2.2 $ .7 $ 1.2 $15.8 ===== ===== ===== ===== ===== 50 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) OTHER SPECIAL CHARGES NMHG: In 1998, NMHG incurred $4.5 million related to increases in temporary labor, moving and training costs associated with the 1997 restructuring program. These costs are classified as selling, general and administrative expenses in the accompanying Consolidated Statements of Income and Comprehensive Income. NACOAL: In 2000, NACoal recognized a charge of $2.4 million, included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income and Comprehensive Income, for the write-off of previously capitalized development costs incurred for a power plant and mine development project in Turkey. In the fourth quarter of 2000, NACoal determined that it would cease development of this project. NACCO & OTHER: In addition to the extraordinary gain described in Note 4, in 2000, Bellaire Corporation ("Bellaire," a wholly owned non-operating subsidiary of NACCO) recognized a charge of $5.6 million included in the accompanying Consolidated Statements of Income and Comprehensive Income as closed mine obligations, which is part of other income (expense), related primarily to an increase in liabilities for Black Lung and other retiree medical benefits, and to environmental obligations arising from former Eastern U.S. underground mining operations. The Company periodically reviews its assumptions used to estimate these reserves. Revisions made to the Company's estimate of environmental clean-up costs, mortality tables used for Black Lung liabilities, discount rates and changes in the expected health care trend rates resulted in an increase to the estimated reserve for these obligations. See also Note 4 and Note 13. In 1999, NACCO recognized a charge of $2.9 million, included in other-net in the accompanying Consolidated Statements of Income and Comprehensive Income, for the write-off of costs incurred to evaluate the potential acquisition of the forklift business of Nissan. NOTE 4 - EXTRAORDINARY GAIN The extraordinary gain of $29.9 million recognized in 2000, net of $16.1 million in taxes, relates to a reduction in the accrual for obligations to UMWA. This obligation to UMWA was initially recognized by Bellaire as an extraordinary charge in 1992 to accrue for the estimated costs associated with the Coal Act, which is discussed in more detail in Note 13. In 2000, the Company received a favorable Opinion by the U.S. District Court in Columbus, Ohio, which ruled that late assignments of beneficiaries made to Bellaire were not allowed as a matter of law. The Company believes that a reversal of this Opinion is not likely in the foreseeable future. As a result of this event and changes to certain assumptions used to estimate this obligation, such as the number of beneficiaries and health care trend rates, the aggregate estimated costs associated with this obligation are expected to be lower than previously anticipated. Management believes that the estimated future cost of this obligation has been adequately accrued. See also Note 3 for a discussion of changes to other closed mine reserves. NOTE 5 - ACQUISITIONS NMHG: In 1998, NMHG announced and began implementation of a strategy to expand into the retail forklift distribution business. As a result, either 100 percent of the stock or substantially all of the assets of several forklift truck retail dealerships were acquired in 2000 and 1999. The dealerships acquired were either existing independent Hyster or Yale dealerships or were converted to Hyster or Yale dealerships at the time of acquisition. The combined preliminary purchase prices of retail dealerships acquired during 2000 were approximately $16.6 million. The combined purchase prices of retail dealerships acquired during 1999 were $62.4 million. Funds for the purchases were provided by either borrowings advanced to NMHG Retail by NMHG Wholesale under existing NMHG Wholesale facilities or by internally generated cash flows. 51 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) These acquisitions were accounted for as purchases and, accordingly, the results of operations of the acquired businesses are included in the accompanying financial statements from their respective dates of acquisition. Goodwill has been recognized for the amount of the excess of the purchase price paid over the fair market value of the net assets acquired and is amortized on a straight-line basis generally over 40 years. Preliminary goodwill recorded in 2000 as a result of these acquisitions was $8.9 million. Goodwill recorded in 1999 was $24.7 million. NACOAL: On October 11, 2000, NACoal acquired certain assets from Phillips Coal Company, including its 75 percent joint venture interest in Mississippi Lignite Mining Company ("MLMC"), its 50 percent joint venture interest in Red River Mining Company ("Red River"), the related lignite reserves under committed contracts at MLMC and Red River and 560 million tons of undeveloped lignite reserves in Texas, Mississippi and Tennessee. The preliminary purchase price for the assets acquired was approximately $128.7 million and was financed with a new five-year, $175.0 million credit facility that includes a $60.0 million revolving line of credit and a $115.0 million term loan. As a result of the acquisition, NACoal now owns 100 percent of both MLMC and Red River. The acquisition was accounted for using the purchase method of accounting and, accordingly, the results of operations for the fully consolidated businesses acquired are included in the accompanying financial statements beginning October 11, 2000. The preliminary purchase price allocation, based on independent third-party appraisals, has resulted in the allocation of $86.5 million to the value of the existing long-term coal supply agreements with the customers ("coal supply agreement"). This identifiable intangible asset will be amortized over the remaining lives of the applicable coal supply agreements, which is 10 years for Red River and 30 years for MLMC. No goodwill was recognized as a result of this transaction. As a result of the acquisitions by NMHG and NACoal, certain liabilities were assumed as follows: 2000 1999 1998 ------- ------- ------- NONCASH INVESTING ACTIVITIES: Fair value of assets acquired .............. $ 179.8 $ 89.6 $ 63.7 Cash paid for the net assets, net of cash acquired .............. (145.3) (62.4) (16.6) ------- ------- ------- Liabilities assumed .... $ 34.5 $ 27.2 $ 47.1 ======= ======= ======= On a pro forma basis, as if the businesses had been acquired at the beginning of fiscal 2000 and 1999, respectively, revenues, net income and earnings per share would not differ materially from the amounts reported in the accompanying Consolidated Financial Statements for 2000 and 1999. ACQUISITION OF MINORITY INTEREST: In 1999, the Company acquired the remaining 2 percent minority interest in NMHG for book value of $11.3 million. NOTE 6 - ACCOUNTS RECEIVABLE SECURITIZATION NMHG Wholesale has an agreement to sell all of its domestic accounts receivable, on a revolving basis, to Lift Truck Funding Company, LLC ("LTF"), a wholly owned subsidiary of NMHG Wholesale. LTF was formed prior to the execution of this agreement for the purpose of buying and selling accounts receivable and is designed to be bankruptcy remote. NMHG Wholesale and LTF also have an agreement with a financial institution whereby LTF can sell, on a revolving basis, an undivided percentage ownership interest in certain eligible accounts receivable, as defined, up to a maximum of $50.0 million. The one-year-term agreements expire in August 2001. The Company intends to extend these agreements or replace them with a similar arrangement. This two-step transaction is accounted for as a sale of receivables. Accordingly, the Company's Consolidated Balance Sheets reflect the portion of receivables transferred to the financial institution as a reduction of accounts receivable, net. In addition to this domestic program, NMHG Wholesale also has agreements with financial institutions outside of the United States which allow for the sale, without recourse, of undivided interests in revolving pools of its foreign trade accounts receivable. The maximum 52 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) allowable amount of foreign trade receivables to be sold was $59.6 million and $70.9 million at December 31, 2000 and 1999, respectively. NMHG Wholesale continues to service the receivables sold and maintains an allowance for doubtful accounts based upon the expected collectibility of all NMHG Wholesale accounts receivable, including the portion of receivables sold. The servicing liability incurred in connection with these transactions is not material. Gross proceeds of $858.2 million, $655.0 million and $763.7 million were received during 2000, 1999 and 1998, respectively, and the balance of accounts receivable sold at December 31, 2000 and 1999 was $71.6 million and $63.6 million, respectively. The discount and any other transaction gains and losses are included in other-net in the Consolidated Statements of Income and Comprehensive Income and totaled $5.5 million, $3.8 million and $3.5 million in 2000, 1999 and 1998, respectively. NOTE 7 - INVENTORIES Inventories are summarized as follows: December 31 ------------------ 2000 1999 ------- ------- Manufactured inventories: Finished goods and service parts- NMHG ............................ $ 103.1 $ 103.5 Housewares ...................... 53.2 46.4 ------- ------- 156.3 149.9 Raw materials and work in process - NMHG Wholesale .................. 157.9 150.1 Housewares ...................... 17.8 19.5 ------- ------- 175.7 169.6 ------- ------- Total manufactured inventories .. 332.0 319.5 Retail inventories: NMHG Retail ..................... 36.8 30.0 Housewares ...................... 19.4 18.9 ------- ------- Total retail inventories ........ 56.2 48.9 Coal - NACoal ...................... 12.0 9.6 Mining supplies - NACoal ........... 23.7 22.4 ------- ------- Total inventories at FIFO ....... 423.9 400.4 LIFO reserve - NMHG ............................ (14.8) (13.2) Housewares ...................... 2.7 3.1 ------- ------- (12.1) (10.1) ------- ------- $ 411.8 $ 390.3 ======= ======= The cost of certain manufactured and retail inventories has been determined using the LIFO method. At December 31, 2000 and 1999, 66 percent of total inventories were determined using the LIFO method. NOTE 8 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment includes the following: December 31 ------------------- 2000 1999 -------- -------- Coal lands and real estate: NMHG ......................... $ 16.8 $ 15.7 Housewares ................... 1.9 1.9 NACoal ....................... 33.7 15.9 Project mining subsidiaries (Note 11) ................. 80.8 81.0 NACCO and Other .............. .1 .1 -------- -------- 133.3 114.6 -------- -------- Plant and equipment: NMHG Wholesale ............... 386.4 374.4 NMHG Retail .................. 95.7 71.8 Housewares ................... 167.7 169.2 NACoal ....................... 85.3 31.7 Project mining subsidiaries (Note 11) ................. 491.1 472.5 NACCO and Other .............. 4.8 4.6 -------- -------- 1,231.0 1,124.2 -------- -------- Property, plant and equipment, at cost ........................ 1,364.3 1,238.8 Less allowances for depreciation, depletion and amortization ..... 653.6 613.4 -------- -------- $ 710.7 $ 625.4 ======== ======== Total depreciation, depletion and amortization expense on property, plant and equipment was $90.3 million, $88.5 million and $74.0 million during 2000, 1999 and 1998, respectively. Proven and probable coal reserves approximated 2.8 billion and 1.9 billion tons at December 31, 2000 and 1999, respectively. The increase was due to the acquisition of certain coal-related assets from Phillips Coal Company. See discussion in Note 5. 53 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 9 - REVOLVING CREDIT AGREEMENTS Financing arrangements are obtained and maintained at the subsidiary level. NACCO has not guaranteed the long-term debt or any borrowings of its subsidiaries. The following table summarizes the Company's available and outstanding borrowings under revolving credit agreements. December 31 ------------------ 2000 1999 ------- ------- Available borrowings, net of limitations: NMHG ................................ $ 389.6 $ 396.2 Housewares .......................... 188.8 187.0 NACoal .............................. 60.0 50.0 ------- ------- $ 638.4 $ 633.2 ======= ======= Current portion of borrowings outstanding: NMHG ................................ $ 33.1 $ 12.3 Housewares .......................... 30.7 29.1 NACoal .............................. 2.5 15.2 ------- ------- $ 66.3 $ 56.6 ======= ======= Unused availability:* NMHG ................................ $ 147.5 $ 169.2 Housewares .......................... 78.1 77.9 NACoal .............................. 29.5 34.8 ------- ------- $ 255.1 $ 281.9 ======= ======= Weighted average stated interest rate: NMHG ................................ 7.1% 6.4% Housewares .......................... 7.0% 6.3% NACoal .............................. 9.0% 6.9% Weighted average effective interest rate (including interest swap agreements): NMHG ................................ 6.4% 6.8% Housewares .......................... 6.8% 6.3% NACoal .............................. 8.9% 6.9% *Unused availability is determined using the available borrowings, net of limitations, reduced by the current portion and long-term portion (see Note 10) of revolving credit agreements outstanding. NMHG: NMHG Wholesale's credit agreement provides for an unsecured revolving credit facility (the "Facility") that permits advances up to $350.0 million. However, the portion of domestic receivables sold reduces this availability. (See Note 6 for a discussion of the sale of domestic accounts receivable.) The June 2002 expiration date of the Facility may be extended annually for one additional year with the consent of the bank group. NMHG Wholesale does not anticipate repayment of the outstanding balance in the subsequent fiscal year. As such, the outstanding balance of this credit facility has been classified as long-term debt. The Facility has performance-based pricing which sets interest rates based upon the achievement of certain financial performance targets. The Facility currently provides for, at NMHG Wholesale's option, Euro-Dollar Loans which bear interest at LIBOR plus 0.2 percent and Money Market Loans which bear interest at Auction Rates (as defined in the agreement) and requires a 0.1 percent fee on the available borrowings. The Facility permits NMHG Wholesale to advance funds to NMHG Retail. Advances from NMHG Wholesale are the primary sources of financing for NMHG Retail. NMHG also has separate facilities totaling $66.4 million and $48.7 million at December 31, 2000 and 1999, respectively. Outstanding letters of credit reduce amounts available under these facilities. A portion of these facilities is denominated in foreign currencies, primarily the British pound sterling and the Australian dollar. At December 31, 2000 and 1999, unused availability, net of limitations, under these facilities was $26.5 million and $25.4 million, respectively. NMHG also maintains various uncommitted lines of credit, which permitted funding up to $30.0 million and $40.0 million at December 31, 2000 and 1999. Under these facilities, unused availability was $6.0 million and $20.3 million at December 31, 2000 and 1999, respectively. HOUSEWARES: HB-PS' credit agreement provides for a revolving credit facility (the "HB-PS Facility") that permits advances up to $160.0 million and is secured by substantially all of the assets of HB-PS. A portion of the outstanding balance is classified as long-term debt because it is not expected to be repaid during the subsequent fiscal year. The HB-PS Facility, which expires in May 2003, provides reduced interest rates if HB-PS achieves a certain interest coverage ratio and allows interest rates quoted under a competitive bid option. The HB-PS Facility currently provides for interest at LIBOR plus 0.3 percent and requires a 0.2 percent facility fee on the available borrowings. The HB-PS Facility allows advances of up to $10.0 million from HB-PS to KCI. Advances from HB-PS are the primary sources of financing for KCI. HB-PS also has separate uncommitted facilities, which may provide funding up to $30.0 million. Outstanding letters of credit reduce amounts available under these facilities. At December 31, 2000 and 1999, availability, net of limitations, under these facilities was $29.7 million and $10.1 million, respectively. 54 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NACOAL: In connection with the acquisition of certain Phillips Coal Company assets, as discussed in Note 5, NACoal entered into a new financing agreement (the "NACoal Facility") which includes a revolving line of credit of up to $60.0 million and a term loan of $115.0 million. Prior to this agreement, NACoal's non-project-mining financing needs were provided by a $50.0 million revolving line of credit. Upon execution of the NACoal Facility, the $50.0 million line of credit was terminated and outstanding amounts were refinanced with proceeds from the NACoal Facility. The NACoal Facility requires annual term loan repayments of $15.0 million, with a final term loan repayment of $55.0 million in October 2005. The revolving credit facility of $60.0 million is available until the facility's expiration in October 2005. The NACoal Facility has performance-based pricing which sets interest rates based upon achieving various levels of Debt to EBITDA ratios, as defined. The NACoal Facility currently provides for, at NACoal's option, Euro-Dollar Loans which bear interest at LIBOR plus a margin based on the level of Debt to EBITDA ratio achieved and Base Rate Advances which bear interest at Base Rates (as defined in the agreement). A facility fee, which is determined based on the level of Debt to EBITDA ratio achieved, is also applied to the aggregate revolving line of credit. At December 31, 2000, term loan borrowings outstanding bear interest at LIBOR plus 2.3 percent and revolving credit borrowings outstanding bear interest at LIBOR plus 1.9 percent. At December 31, 2000, the revolving credit facility fee was 0.4 percent. As a result of the NACoal Facility, the Company's exposure to changes in the market rate of interest increased. To hedge this exposure, NACoal entered into several interest rate swap agreements which require NACoal to pay a fixed rate of interest and receive a variable rate of interest linked to LIBOR. As a result, NACoal has effectively hedged its exposure to changes in the market rate of interest for the entire term loan and for a portion of the outstanding balance of the revolving line of credit. NOTE 10 - LONG-TERM DEBT Subsidiary long-term debt is as follows: December 31 ------------------ 2000 1999 ------- ------- NMHG: Long-term portion of revolving credit agreements . $ 209.0 $ 214.7 Capital lease obligations and other term loans ........ 62.8 43.7 ------- ------- 271.8 258.4 ------- ------- HOUSEWARES: Long-term portion of revolving credit agreement .. 80.0 80.0 Capital lease obligations .... .3 .4 ------- ------- 80.3 80.4 ------- ------- NACOAL: Long-term portion of revolving credit agreement .. 28.0 -- Term loans ................... 115.3 -- ------- ------- 143.3 -- ------- ------- Total long-term debt .......... 495.4 338.8 Less current portion of capital leases and term loans ........ (45.4) (12.5) ------- ------- $ 450.0 $ 326.3 ======= ======= Annual maturities of revolving lines of credit and term loans are as follows: $102.3 million in 2001, $229.3 million in 2002, $95.0 million in 2003, $15.0 million in 2004 and $83.0 million in 2005. Interest paid on revolving credit agreements and long-term debt was $31.1 million, $26.4 million and $21.5 million during 2000, 1999 and 1998, respectively. Interest capitalized was $3.8 million, $1.1 million and $0.2 million in 2000, 1999 and 1998, respectively. The credit agreements for NMHG Wholesale, HB-PS and NACoal contain certain covenants and restrictions. These covenants require, among other things, some or all of the following: maintenance of certain minimum amounts of net worth and certain specified ratios of working capital, debt to capitalization, debt to EBITDA, interest coverage and fixed charge coverage. These ratios are calculated at the subsidiary level. Restrictions may also include limits on capital expenditures, advances to affiliates and dividends. At December 31, 2000, the subsidiaries were in compliance with the covenants in their credit agreements. 55 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 11 - OBLIGATIONS OF PROJECT MINING SUBSIDIARIES Three of NACoal's subsidiaries (the "project mining subsidiaries") operate lignite mines under long-term contracts with various utility customers to sell lignite at a price based on actual cost plus an agreed pre-tax profit per ton. The utility customers have arranged and guaranteed the financing for the development and operation of the project mining subsidiaries. The obligations of these project mining subsidiaries included in the Company's Consolidated Balance Sheets do not affect the short-term or long-term liquidity of the Company and are without recourse to NACCO and its NACoal subsidiary. Obligations of the project mining subsidiaries, less current maturities, consist of the following: December 31 ----------------- 2000 1999 ------- ------- Capitalized lease obligations .............. $ 104.8 $ 109.8 Advances from customers .................... 140.0 145.1 Promissory notes with interest rates ranging from 5.6% to 8.7% in 2000 and 5.3% to 8.7% in 1999 ............ 37.9 34.3 ------- ------- $ 282.7 $ 289.2 ======= ======= Advances from customers are used to develop, operate and provide for the ongoing working capital needs of certain project mining subsidiaries. The customers have established a repayment schedule for only a portion, or $95.4 million, of the total advances. In addition, portions of the advances are non-interest-bearing. The annual maturities of advances from customers and promissory notes are as follows: $18.0 million in 2001, $15.1 million in 2002, $11.2 million in 2003, $8.9 million in 2004, $8.9 million in 2005 and $133.8 million thereafter. Interest paid was $17.1 million, $17.7 million and $13.0 million during 2000, 1999 and 1998, respectively. The cost of coal, which is passed through to the utility customers, includes interest expense. The project mining subsidiaries' capital lease obligations for mining equipment have the following future minimum lease payments at December 31, 2000: 2001 ...................................... $ 28.2 2002 ...................................... 22.4 2003 ...................................... 20.8 2004 ...................................... 19.0 2005 ...................................... 18.4 Subsequent to 2005. ....................... 60.4 -------- Total minimum lease payments .............. 169.2 Amounts representing interest ............. (44.7) -------- Present value of net minimum lease payments 124.5 Current maturities ........................ (19.7) -------- $ 104.8 ======== 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. Project mining assets recorded under capital leases are included in property, plant and equipment and consist of the following: December 31 ----------------- 2000 1999 ------- ------- Plant and equipment .......... $ 210.9 $ 201.2 Less accumulated amortization 126.8 114.9 ------- ------- $ 84.1 $ 86.3 ======= ======= During 2000, 1999 and 1998, the project mining subsidiaries incurred capital lease obligations of $11.6 million, $3.8 million and $4.9 million, respectively, in connection with lease agreements to acquire plant and equipment. The project mines also lease certain mining equipment under noncancellable operating leases which expire at various dates through 2014. Future minimum operating lease payments at December 31, 2000, are: $4.7 million in 2001, $4.6 million in 2002, $4.5 million in 2003, $4.2 million in 2004, $4.2 million in 2005 and $2.0 million thereafter. Rental expense incurred, which is included in the cost of coal passed through to the utility customers, was $5.3 million, $1.0 million and $1.4 million during 2000, 1999 and 1998, respectively. The above obligations are secured by substantially all of the owned assets of the respective project mining subsidiary and the assignment of all rights under its coal sales agreement. 56 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 12 - LEASING ARRANGEMENTS The Company leases certain office, manufacturing and warehouse facilities, retail stores and machinery and equipment under noncancellable operating leases that expire at various dates through 2014. NMHG Retail also leases certain forklift trucks that are held for sale or sublease to customers. Many leases include renewal and/or purchase options. Future minimum operating lease payments, excluding project mining subsidiaries, at December 31, 2000, are: $62.1 million in 2001, $55.2 million in 2002, $45.2 million in 2003, $36.6 million in 2004, $26.9 million in 2005 million and $64.0 million thereafter. Aggregate future minimum rentals to be received under noncancellable subleases of forklift trucks as of December 31, 2000 are $19.2 million. Rental expense for all operating leases, excluding project mining subsidiaries, consists of the following: 2000 1999 1998 ------- ------- ------- Minimum rentals .. $ 44.2 $ 32.6 $ 29.4 Sublease income .. (7.8) -- -- ------- ------- ------- Rent expense, net $ 36.4 $ 32.6 $ 29.4 ======= ======= ======= NOTE 13 - SELF-INSURANCE RESERVES AND OTHER Self-insurance reserves and other consists of the following: December 31 ----------------- 2000 1999 ------- ------- Undiscounted UMWA obligation .. $ 38.0 $ 83.4 Present value of other closed mine obligations ............. 25.0 16.4 Other self-insurance reserves . 137.4 140.9 ------- ------- $ 200.4 $ 240.7 ======= ======= The UMWA obligation and the other closed mine obligations relate to Bellaire's former Eastern U.S. underground mining operations and the Indian Head Mine, which ceased operations in 1992. The obligation to UMWA resulted from the Coal Act, which requires Bellaire to incur additional costs for the medical expenses of certain United Mine Worker retirees. Annual cash payments of approximately $1.9 million, declining steadily over time to approximately $0.1 million, are expected to be made through 2050. The Company has recorded this obligation on an undiscounted basis. The decrease in the reserve relates primarily to a reduction in the estimated liability made in the fourth quarter of 2000. See further discussion in Note 4. The other closed mine obligations include reserves for land reclamation and site treatment at certain closed eastern underground and western surface mines, as well as reserves for retiree medical benefit costs, workers' compensation and Black Lung benefit costs. See Note 3 for a discussion of the increase to the closed mine obligations. Other self-insurance reserves include product liability reserves, employee retirement obligations and other miscellaneous reserves. NOTE 14 - FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair values of revolving credit agreements and long-term debt were determined using current rates offered for similar obligations and approximated carrying values at December 31, 2000 and 1999. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable and derivatives. Concentration of credit risk on accounts receivable is mitigated by the large number of customers comprising the Company's customer base and their dispersion across many different industries and geographies. To further reduce credit risk associated with accounts receivable, the Company performs periodic credit evaluations of its customers, but does not generally require advance payments or collateral. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one institution. 57 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) DERIVATIVE FINANCIAL INSTRUMENTS FOREIGN CURRENCY DERIVATIVES: NMHG and HB-PS held forward foreign currency exchange contracts in the amounts of $92.2 million and $9.1 million, respectively, at December 31, 2000, primarily denominated in British pounds sterling, euros, Japanese yen and Canadian dollars. At December 31, 1999, NMHG and HB-PS held forward foreign currency exchange contracts in the amounts of $91.1 million and $11.1 million, respectively, primarily denominated in euros, British pounds sterling, Japanese yen and Canadian dollars. The amount of deferred gain at December 31, 2000 and the amount of deferred loss at December 31, 1999 were not material. The fair market value of these contracts was estimated based on quoted market prices and approximated a net payable of $0.8 million and a net receivable of $0.3 million at December 31, 2000 and 1999, respectively. INTEREST RATE DERIVATIVES: The following table summarizes the notional amounts, related rates (including applicable margins) and remaining terms on interest rate swap agreements active at December 31: Notional Average Amount Fixed Rate Remaining ---------------- ------------ Term at 2000 1999 2000 1999 Dec. 31, 2000 ---- ---- ---- ---- ------------- NMHG. . . . . $215.0 $190.0 6.3% 6.9% Various, extending to January 2005 Housewares. . $ 80.0 $ 62.5 6.4% 6.5% Various, extending to March 2003 NACoal. . . . $147.9 $ 33.0 8.1% 6.2% Various, extending to June 2008 Interest rate swap agreements held by NMHG have terms that vary from one-year to seven-year periods from inception. Terms of Housewares' interest rate swap agreements vary from one-year to four-year periods from inception. At NACoal, $27.9 million of interest rate swap agreements hedge promissory notes held by the project mining subsidiaries (see Note 11). Maturities of these interest rate swap agreements correspond with the maturities of the hedged obligation. The related obligation is included in obligations of project mining subsidiaries in the Consolidated Balance Sheets. The net interest expense paid or received is included in the cost of coal and passed through to the utility customers. The remaining NACoal interest rate swap agreements hedge the NACoal Facility as discussed in Note 9. The fair market value of all interest rate swap agreements, which was based on quotes obtained from independent brokers, was a net payable of $4.7 million at December 31, 2000 and a net receivable of $1.3 million at December 31, 1999. NOTE 15 - CONTINGENCIES Various legal and regulatory proceedings and claims have been or may be asserted against NACCO and certain subsidiaries relating to the conduct of their businesses, including product liability, environmental and other claims. These proceedings are incidental to the ordinary course of business of the Company. Management believes that it has meritorious defenses and will vigorously defend itself in these actions. Any costs that management estimates will be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably estimated. Although the ultimate disposition of these proceedings is not presently determinable, management believes, after consultation with its legal counsel, that the likelihood is remote that material costs will be incurred in excess of accruals already recognized. NMHG is subject to recourse or repurchase obligations under various financing arrangements for certain independently owned retail dealerships. Also, certain dealer loans are guaranteed by NMHG. When NMHG is the guarantor of the principal amount financed, a security interest is usually maintained in certain assets of parties for whom NMHG is guaranteeing debt. Total amounts subject to recourse or repurchase obligations at December 31, 2000 and 1999 were $191.5 million and $157.3 million, respectively. Losses anticipated under the terms of the recourse or repurchase obligations are not significant and have been reserved for in the accompanying Consolidated Financial Statements. 58 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 16 - 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, 2000 was 25,000,000 shares and 6,756,176 shares, respectively. Treasury shares of Class A common stock totaling 1,612,762 and 1,626,964 at December 31, 2000 and 1999, respectively, have been deducted from shares issued. STOCK OPTIONS: The 1975 and 1981 stock option plans, as amended, provide for the granting to officers and other key employees of options to purchase Class A common stock 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. As of December 31, 2000 and 1999, all options that were granted under stock option plans have been exercised or cancelled. No options remain outstanding. The Company does not presently intend to issue additional stock options. At December 31, 2000, 1999 and 1998, there were 80,701 shares of Class A common stock and 80,100 shares of Class B common stock available for grant. However, no options were granted during 2000, 1999 and 1998. In 1999, options for 25,000 shares of Class A common stock were exercised at an option price of $35.56. In 1998, options for 1,800 shares of Class A common stock were exercised at an option price of $32.00. At December 31, 1998, there were options outstanding relating to 25,000 shares of Class A common stock with an option price of $35.56 that were granted on March 1, 1989. The Company applies AICPA Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for stock options. Because there have been no options granted subsequent to 1995, no additional pro forma disclosures are required as provided in SFAS No. 123, "Accounting for Stock Based Compensation." NOTE 17 - EARNINGS PER SHARE For purposes of calculating the basic and diluted earnings per share, no adjustments have been made to the reported amounts of net income. The share amounts used for the year ended December 31 are as follows: 2000 1999 1998 -------- -------- -------- Basic common shares (weighted average) .... 8.167 8.150 8.147 Dilutive stock options . -- .004 .019 -------- -------- -------- Diluted common shares .. 8.167 8.154 8.166 ======== ======== ======== NOTE 18 - INCOME TAXES The components of income before income taxes and provision for income taxes for the year ended December 31 are as follows: 2000 1999 1998 ------- ------- ------- INCOME (LOSS) BEFORE INCOME TAXES Domestic ............ $ 59.9 $ 91.5 $ 137.9 Foreign ............. .1 (4.9) 28.1 ------- ------- ------- $ 60.0 $ 86.6 $ 166.0 ======= ======= ======= PROVISION FOR INCOME TAXES Current tax expense: Federal ............ $ 27.3 $ 27.7 $ 53.1 State .............. 5.7 5.3 9.7 Foreign ............ 4.5 2.7 9.2 ------- ------- ------- Total current ..... 37.5 35.7 72.0 ------- ------- ------- Deferred tax benefit: Federal ............ (6.9) (.3) (10.0) State .............. (1.6) (.5) (1.3) Foreign ............ (3.6) (4.4) (.8) ------- ------- ------- Total deferred .... (12.1) (5.2) (12.1) ------- ------- ------- Increase (decrease) in valuation allowance . (3.1) 1.2 .8 ------- ------- ------- $ 22.3 $ 31.7 $ 60.7 ======= ======= ======= Substantially all of the Company's interest expense and goodwill amortization has been allocated to domestic income before income taxes. The Company made income tax payments of $36.6 million, $44.2 million and $74.6 million during 2000, 1999 and 1998, respectively. During the same period, income tax refunds totaled $2.5 million, $1.4 million and $0.8 million, respectively. 59 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) A reconciliation of the federal statutory and effective income tax for the year ended December 31 is as follows: 2000 1999 1998 ------- ------- ------- Income before taxes ...... $ 60.0 $ 86.6 $ 166.0 ======= ======= ======= Statutory taxes at 35.0% $ 21.0 $ 30.3 $ 58.1 Amortization of goodwill 5.2 5.2 4.9 State income taxes ...... 2.5 3.3 5.7 Foreign statutory rate differences ....... .8 (1.4) (1.6) Percentage depletion .... (3.3) (3.6) (3.7) Valuation allowance ..... (3.1) 1.2 .8 Export benefits ......... (1.0) (1.3) (1.4) Earnings reported net of taxes ........... (.2) (.6) (1.2) Other-net ............... .4 (1.4) (.9) ------- ------- ------- Provision for income taxes $ 22.3 $ 31.7 $ 60.7 ======= ======= ======= Effective rate ........... 37.2% 36.6% 36.6% ======= ======= ======= The Company does not provide for deferred taxes on certain unremitted foreign earnings. Management has decided that the earnings of NMHG's foreign subsidiaries have been and will be indefinitely reinvested in NMHG's foreign operations and, therefore, a reserve for unremitted foreign earnings is not required. As of December 31, 2000, the cumulative unremitted earnings of the Company's foreign subsidiaries are $157.3 million. It is impracticable to determine the amount of unrecognized deferred taxes with respect to these earnings; however, foreign tax credits would be available to reduce U.S. income taxes in the event of a distribution. A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows: December 31 ------------------ 2000 1999 ------- ------- DEFERRED TAX ASSETS Accrued expenses and reserves ........... $ 79.6 $ 68.4 Employee benefits ....................... 22.8 23.6 Reserve for UMWA ........................ 13.6 30.5 Net operating loss carryforwards ........ 13.1 9.1 ------- ------- Total deferred tax assets ............ 129.1 131.6 Less: Valuation allowance ............ (4.6) (7.9) ------- ------- 124.5 123.7 ------- ------- DEFERRED TAX LIABILITIES Depreciation and depletion .............. 45.8 48.8 Inventories ............................. 14.9 14.8 Other ................................... 16.9 12.7 ------- ------- Total deferred tax liabilities ....... 77.6 76.3 ------- ------- Net deferred tax asset .............. $ 46.9 $ 47.4 ======= ======= The Company periodically reviews the need for a valuation allowance against certain deferred tax assets and recognizes these assets to the extent that realization is more likely than not. Based on a review of earnings history and trends, forecasted earnings and expiration of carryforwards, the Company believes that the valuation allowance provided is appropriate. In 2000, the valuation allowance decreased to $4.6 million at December 31, 2000 from $7.9 million at December 31, 1999. At December 31, 2000, the Company had $2.4 million of net operating loss carryforwards which expire, if unused, in years 2001 through 2020 and $10.7 million which are not subject to expiration. The tax returns of the Company and certain of its subsidiaries are being examined by various taxing authorities. The Company has not been informed of any material assessment resulting from these examinations and will vigorously contest any material assessment. Management believes that any potential adjustment would not materially affect the Company's financial condition or results of operations. 60 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 19 - RETIREMENT BENEFIT PLANS DEFINED BENEFIT PLANS: The Company maintains various defined benefit pension plans covering most of 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. Plan assets consist primarily of publicly traded stocks, investment contracts and government and corporate bonds. In 1996, pension benefits were frozen for employees covered under NMHG's and HB-PS' United States plans, except for those NMHG employees participating in collective bargaining agreements. As a result, in the United States only NACoal employees and certain NMHG employees covered under collective bargaining agreements will earn retirement benefits under defined benefit pension plans. Other employees of the Company, including NMHG and HB-PS employees whose pension benefits were frozen as of December 31, 1996, will receive retirement benefits under defined contribution retirement plans. As a result of management's decision to phase out manufacturing activities in the NMHG Danville, Illinois, assembly plant, the Company recognized a curtailment loss of $5.1 million in 2000. See also Note 3. Set forth below is a detail of the net periodic pension expense and the assumptions used in accounting for the United States and the United Kingdom defined benefit plans for the years ended December 31.
2000 1999 1998 -------- -------- -------- UNITED STATES PLANS Service cost ................................. $ 3.0 $ 3.3 $ 5.5 Interest cost ................................ 10.3 10.1 9.7 Expected return on plan assets ............... (12.6) (12.3) (10.7) Amortization of transition asset ............. (.4) (.4) (.4) Amortization of prior service cost ........... .4 .4 .4 Recognized actuarial (gain) loss ............. (1.3) (.2) (.2) Curtailment loss ............................. 5.1 -- -- -------- -------- -------- Net periodic pension expense ............... $ 4.5 $ .9 $ 4.3 ======== ======== ======== Assumptions: Weighted average discount rates ............ 8.00% 7.75% 7.00% Rate of increase in compensation levels .... 4.25% 4.25% 4.00% Expected long-term rate of return on assets 9.00% 9.00% 9.00% UNITED KINGDOM PLAN Service cost ................................. $ 2.0 $ 2.4 $ 2.2 Interest cost ................................ 3.0 3.1 2.8 Expected return on plan assets ............... (4.3) (3.7) (4.5) Amortization of transition asset ............. (.1) (.1) (.1) Amortization of prior service cost ........... .1 .1 .1 Recognized actuarial (gain) loss ............. (.4) .4 (1.1) -------- -------- -------- Net periodic pension (income) expense ...... $ .3 $ 2.2 $ (.6) ======== ======== ======== Assumptions: Weighted average discount rates ............ 6.75% 6.25% 5.75% Rate of increase in compensation levels .... 4.25% 3.50% 3.50% Expected long-term rate of return on assets 9.00% 7.50% 7.50%
61 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) The following sets forth the changes in the benefit obligation and the plan assets during the year and reconciles the funded status of the defined benefit plans with the amounts recognized in the Consolidated Balance Sheets at December 31:
2000 1999 ------------------ ----------------- UNITED UNITED United United STATES KINGDOM States Kingdom PLANS PLAN Plans Plan ----- ---- ----- ---- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year ........................ $134.6 $ 51.4 $148.0 $ 56.7 Service cost ................................................... 3.0 2.0 3.3 2.4 Interest cost .................................................. 10.3 3.0 10.1 3.1 Actuarial (gain) loss .......................................... 1.8 (.6) (18.3) (7.9) Benefits paid .................................................. (7.5) (2.1) (8.5) (1.0) Plan amendments ................................................ 1.6 -- -- -- Foreign currency exchange rate changes ......................... -- (4.0) -- (1.9) ------ ------ ------ ------ Benefit obligation at end of year ............................. $143.8 $ 49.7 $134.6 $ 51.4 ------ ------ ------ ------ CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year ................. $151.9 $ 59.5 $135.7 $ 50.5 Actual return on plan assets ................................... 17.4 10.4 23.3 9.0 Employer contributions ......................................... 1.4 1.7 1.4 2.7 Employee contributions ......................................... -- .5 -- -- Benefits paid .................................................. (7.5) (2.1) (8.5) (1.0) Foreign currency exchange rate changes ......................... (.1) (4.8) -- (1.7) ------ ------ ------ ------ Fair value of plan assets at end of year ...................... $163.1 $ 65.2 $151.9 $ 59.5 ------ ------ ------ ------ NET AMOUNT RECOGNIZED Plan assets in excess of obligation ............................ $ 19.3 $ 15.5 $ 17.3 $ 8.1 Unrecognized prior service cost ................................ 1.2 .8 3.0 .9 Unrecognized actuarial (gain) loss ............................. (41.6) (5.2) (38.0) 1.6 Unrecognized net transition asset .............................. (.1) (.3) (.5) (.3) Contributions in fourth quarter ................................ -- .3 -- .4 ------ ------ ------ ------ Net amount recognized ......................................... $(21.2) $ 11.1 $(18.2) $ 10.7 ====== ====== ====== ====== AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS CONSIST OF: Prepaid benefit cost ........................................... $ 5.7 $ 11.1 $ 7.6 $ 10.7 Accrued benefit liability ...................................... (30.0) -- (25.8) -- Intangible asset ............................................... .7 -- -- -- Accumulated other comprehensive income ......................... 1.4 -- -- -- Deferred tax asset ............................................. 1.0 -- -- -- ------ ------ ------ ------ Net amount recognized ......................................... $(21.2) $ 11.1 $(18.2) $ 10.7 ====== ====== ====== ======
DEFINED CONTRIBUTION PLANS: NACCO and its subsidiaries have defined contribution (401(k)) plans for substantially all employees. For NACCO and those subsidiaries, the applicable company matches employee contributions based on plan provisions. In addition, NACCO and certain other subsidiaries have defined contribution retirement plans whereby the applicable company's contribution to participants is determined annually based on a formula which includes the effect of actual compared to targeted operating results and the age and compensation of the participants. Total costs, including Company contributions, for these plans were $20.7 million, $21.6 million and $20.7 million in 2000, 1999 and 1998, respectively. 62 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 20 - BUSINESS SEGMENTS Financial information for each of NACCO's reportable segments, as defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," is presented in the following table. See Note 1 for a discussion of the Company's operating segments and product lines. NACCO's non-operating segment, NACCO and Other, includes the accounts of the parent company and Bellaire. The accounting policies of the segments are the same as those described in Note 2 - Accounting Policies. NMHG Wholesale derives a portion of its revenues from transactions with NMHG Retail. The amount of these revenues, which are based on current market prices on similar third-party transactions, are indicated in the following table on the line "NMHG Eliminations" in the revenues section. No other intersegment sales transactions occur. Other intersegment transactions are recognized based on similar third-party transactions; that is, at current market prices. On January 1, 2000, NACCO began charging fees to its operating subsidiaries for services provided by the corporate headquarters. The 2000 pre-tax fee of $10.1 million was charged to certain operating segments based on fees incurred on their behalf, including services performed for each, as follows: NMHG Wholesale: $6.6 million, Housewares: $2.5 million and NACoal: $1.0 million. Each of the segments has included this charge on the line other-net. As a result of these fees, the parent company's loss before extraordinary gain for 2000 was $4.9 million, compared with a net loss of $8.3 million in 1999. These fees are expected to continue in 2001 in amounts that are comparable to 2000.
2000 1999 1998 -------- -------- -------- REVENUES FROM EXTERNAL CUSTOMERS NMHG Wholesale ........................... $1,750.0 $1,618.9 $1,714.8 NMHG Retail .............................. 280.3 228.1 59.6 NMHG Eliminations ........................ (98.2) (85.6) (28.3) -------- -------- -------- NMHG Consolidated ......................... 1,932.1 1,761.4 1,746.1 Housewares ................................ 649.9 596.7 537.6 NACoal .................................... 289.2 277.7 285.4 NACCO and Other ........................... .1 .1 .2 -------- -------- -------- $2,871.3 $2,635.9 $2,569.3 ======== ======== ======== GROSS PROFIT NMHG Wholesale ........................... $ 292.9 $ 255.7 $ 330.9 NMHG Retail .............................. 54.1 49.3 15.2 NMHG Eliminations ........................ .5 (1.5) (.4) -------- -------- -------- NMHG Consolidated ......................... 347.5 303.5 345.7 Housewares ................................ 119.8 128.7 115.6 NACoal .................................... 49.0 52.7 54.4 NACCO and Other ........................... (.1) (.2) (.2) -------- -------- -------- $ 516.2 $ 484.7 $ 515.5 ======== ======== ======== SELLING, GENERAL AND ADMINISTRATIVE EXPENSES NMHG Wholesale ........................... $ 181.5 $ 169.6 $ 186.5 NMHG Retail .............................. 69.8 63.9 16.9 NMHG Eliminations ........................ (.9) (.5) - -------- -------- -------- NMHG Consolidated ......................... 250.4 233.0 203.4 Housewares ................................ 87.6 82.7 74.8 NACoal .................................... 17.4 12.3 12.4 NACCO and Other ........................... 11.6 9.0 10.5 -------- -------- -------- $ 367.0 $ 337.0 $ 301.1 ======== ======== ======== AMORTIZATION OF GOODWILL NMHG Wholesale ........................... $ 11.6 $ 11.6 $ 11.6 NMHG Retail .............................. 1.0 .6 .1 -------- -------- -------- NMHG Consolidated ......................... 12.6 12.2 11.7 Housewares ................................ 3.1 3.0 3.0 -------- -------- -------- $ 15.7 $ 15.2 $ 14.7 ======== ======== ========
63 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data)
2000 1999 1998 -------- -------- -------- OPERATING PROFIT (LOSS) NMHG Wholesale ........................................ $ 85.9 $ 74.5 $ 134.4 NMHG Retail ........................................... (16.7) (15.2) (1.8) NMHG Eliminations ..................................... 1.4 (1.0) (.4) ------- ------- ------- NMHG Consolidated ...................................... 70.6 58.3 132.2 Housewares ............................................. 27.4 41.8 34.6 NACoal ................................................. 31.6 40.4 42.0 NACCO and Other ........................................ (11.7) (9.2) (10.7) ------- ------- ------- $ 117.9 $ 131.3 $ 198.1 ======= ======= ======= OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION NMHG Wholesale ........................................ $ 97.5 $ 86.1 $ 146.0 NMHG Retail ........................................... (15.7) (14.6) (1.7) NMHG Eliminations ..................................... 1.4 (1.0) (.4) ------- ------- ------- NMHG Consolidated ...................................... 83.2 70.5 143.9 Housewares ............................................. 30.5 44.8 37.6 NACoal ................................................. 31.6 40.4 42.0 NACCO and Other ........................................ (11.7) (9.2) (10.7) ------- ------- ------- $ 133.6 $ 146.5 $ 212.8 ======= ======= ======= INTEREST EXPENSE NMHG Wholesale ........................................ $ (13.4) $ (16.9) $ (14.0) NMHG Retail ........................................... (4.6) (3.0) (1.2) NMHG Eliminations ..................................... (3.2) .9 1.2 ------- ------- ------- NMHG Consolidated ...................................... (21.2) (19.0) (14.0) Housewares ............................................. (8.6) (6.7) (7.0) NACoal ................................................. (.7) -- (.6) NACCO and Other ........................................ (.2) (.7) (1.0) Eliminations ........................................... .5 .7 1.0 ------- ------- ------- (30.2) (25.7) (21.6) Project mining subsidiaries ............................ (16.9) (17.6) (13.0) ------- ------- ------- $ (47.1) $ (43.3) $ (34.6) ======= ======= ======= INTEREST INCOME NMHG Wholesale ........................................ $ 2.2 $ 8.2 $ 3.4 NMHG Retail ........................................... .1 .2 -- NMHG Eliminations ..................................... -- (3.6) (1.2) ------- ------- ------- NMHG Consolidated ...................................... 2.3 4.8 2.2 Housewares ............................................. -- .1 -- NACoal ................................................. .7 .7 1.2 Eliminations ........................................... (.5) (.7) (1.1) ------- ------- ------- $ 2.5 $ 4.9 $ 2.3 ======= ======= ======= OTHER-NET, INCOME (EXPENSE) - (EXCLUDING INTEREST INCOME) NMHG Wholesale ........................................ $ (14.2) $ (3.4) $ -- NMHG Retail ........................................... .2 .3 -- NMHG Eliminations ..................................... (.1) .1 -- ------- ------- ------- NMHG Consolidated ...................................... (14.1) (3.0) -- Housewares ............................................. (2.6) (.5) (.7) NACoal ................................................. (1.2) (.3) -- NACCO and Other ........................................ 4.6 (2.5) .9 ------- ------- ------- $ (13.3) $ (6.3) $ .2 ======= ======= =======
64 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data)
2000 1999 1998 -------- -------- -------- PROVISION FOR INCOME TAXES NMHG Wholesale ................................. $ 24.6 $ 24.4 $ 47.6 NMHG Retail .................................... (6.7) (4.9) (1.2) NMHG Eliminations .............................. (.5) (1.1) (.1) -------- -------- -------- NMHG Consolidated ............................... 17.4 18.4 46.3 Housewares ...................................... 7.4 13.5 11.6 NACoal .......................................... (.1) 4.5 7.1 NACCO and Other ................................. (2.4) (4.7) (4.3) -------- -------- -------- $ 22.3 $ 31.7 $ 60.7 ======== ======== ======== NET INCOME (LOSS) NMHG Wholesale ................................. $ 37.0 $ 39.0 $ 77.2 NMHG Retail .................................... (14.3) (12.8) (1.9) NMHG Eliminations .............................. (1.4) (2.5) (.2) -------- -------- -------- NMHG Consolidated ............................... 21.3 23.7 75.1 Housewares ...................................... 8.8 21.2 15.2 NACoal .......................................... 12.6 16.5 20.3 NACCO and Other ................................. 25.0 (8.3) (8.3) -------- -------- -------- $ 67.7 $ 53.1 $ 102.3 ======== ======== ======== TOTAL ASSETS NMHG Wholesale ................................. $1,167.2 $1,040.5 $1,064.3 NMHG Retail .................................... 232.8 185.0 87.8 NMHG Eliminations .............................. (158.3) (46.9) (51.7) -------- -------- -------- NMHG Consolidated ............................... 1,241.7 1,178.6 1,100.4 Housewares ...................................... 366.4 372.8 334.0 NACoal .......................................... 204.1 64.3 43.1 NACCO and Other ................................. 41.8 47.6 53.6 -------- -------- -------- 1,854.0 1,663.3 1,531.1 Project mining subsidiaries ..................... 389.9 392.0 418.6 -------- -------- -------- 2,243.9 2,055.3 1,949.7 Consolidating eliminations ...................... (50.0) (42.3) (51.4) -------- -------- -------- $2,193.9 $2,013.0 $1,898.3 ======== ======== ======== DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE NMHG Wholesale ................................. $ 40.6 $ 39.9 $ 36.1 NMHG Retail .................................... 14.0 14.2 1.8 -------- -------- -------- NMHG Consolidated ............................... 54.6 54.1 37.9 Housewares ...................................... 19.3 17.6 16.7 NACoal .......................................... 3.2 3.1 3.3 NACCO and Other ................................. .3 .4 .4 -------- -------- -------- 77.4 75.2 58.3 Project mining subsidiaries ..................... 28.7 28.8 30.7 -------- -------- -------- $ 106.1 $ 104.0 $ 89.0 ======== ======== ======== CAPITAL EXPENDITURES NMHG Wholesale ................................. $ 43.3 $ 44.7 $ 57.9 NMHG Retail .................................... 8.5 1.5 6.0 -------- -------- -------- NMHG Consolidated ............................... 51.8 46.2 63.9 Housewares ...................................... 22.0 16.5 16.8 NACoal .......................................... 3.9 2.7 3.8 NACCO and Other ................................. .3 .1 -- -------- -------- -------- 78.0 65.5 84.5 Project mining subsidiaries ..................... 15.3 10.0 15.8 -------- -------- -------- $ 93.3 $ 75.5 $ 100.3 ======== ======== ========
65 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) DATA BY GEOGRAPHIC AREA No single country outside of the United States comprised 10 percent or more of the Company's revenues from unaffiliated customers. The Other category below includes Canada, Mexico, South America and Asia-Pacific. In addition, no single customer comprised 10 percent or more of the Company's revenues from unaffiliated customers.
Europe, United Africa and States Middle East Other Consolidated ------ ----------- ----- ------------ 2000 - ------------------------------------- REVENUES FROM UNAFFILIATED CUSTOMERS, BASED ON THE CUSTOMER'S LOCATION ... $2,272.6 $ 373.9 $ 224.8 $2,871.3 ======== ======== ======== ======== LONG-LIVED ASSETS ................... $1,018.0 $ 199.1 $ 131.3 $1,348.4 ======== ======== ======== ======== 1999 - ------------------------------------- Revenues from unaffiliated customers, based on the customer's location ... $1,985.1 $ 491.5 $ 159.3 $2,635.9 ======== ======== ======== ======== Long-lived assets ................... $ 926.9 $ 189.8 $ 94.0 $1,210.7 ======== ======== ======== ======== 1998 - ------------------------------------- Revenues from unaffiliated customers, based on the customer's location ... $1,964.9 $ 485.2 $ 119.2 $2,569.3 ======== ======== ======== ======== Long-lived assets ................... $ 917.5 $ 192.8 $ 52.8 $1,163.1 ======== ======== ======== ========
NOTE 21 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) A summary of the unaudited quarterly results of operations for the year ended December 31 is as follows:
2000 ---------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- REVENUES NMHG Wholesale ..................... $ 438.0 $ 450.0 $ 414.3 $ 447.7 NMHG Retail (including eliminations) 44.5 48.6 49.2 39.8 Housewares ......................... 127.9 138.1 162.8 221.1 NACoal ............................. 71.5 69.7 73.4 74.6 NACCO and Other .................... -- -- .1 -- ------- ------- ------- ------- 681.9 706.4 699.8 783.2 ------- ------- ------- ------- GROSS PROFIT ......................... 120.2 126.7 124.4 132.4 ------- ------- ------- ------- OPERATING PROFIT(LOSS) NMHG Wholesale ..................... 24.5 28.5 18.9 14.0 NMHG Retail (including eliminations) (3.0) (3.5) (2.4) (6.4) Housewares ......................... (.5) 2.7 7.3 17.9 NACoal ............................. 8.2 8.1 9.3 6.0 NACCO and Other .................... (2.4) (2.6) (3.0) (3.7) ------- ------- ------- ------- 26.8 33.2 30.1 27.8 ------- ------- ------- ------- INCOME BEFORE EXTRAORDINARY GAIN ..... 9.2 13.6 8.9 6.1 Extraordinary gain ................... -- -- -- 29.9 ------- ------- ------- ------- NET INCOME ........................... $ 9.2 $ 13.6 $ 8.9 $ 36.0 ======= ======= ======= ======= BASIC AND DILUTED EARNINGS PER SHARE Income before extraordinary gain ..... $ 1.13 $ 1.67 $ 1.09 $ 0.75 Extraordinary gain ................... -- -- -- 3.66 ------- ------- ------- ------- Net income ........................... $ 1.13 $ 1.67 $ 1.09 $ 4.41 ======= ======= ======= =======
66 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data)
1999 ---------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- REVENUES NMHG Wholesale ................................... $ 425.4 $ 420.6 $ 364.6 $ 408.3 NMHG Retail (including eliminations) ............ 21.5 40.5 34.2 46.3 Housewares ....................................... 111.4 127.0 150.6 207.7 NACoal ........................................... 63.6 65.0 72.6 76.5 NACCO and Other .................................. -- .1 -- -- ------- ------- ------- ------- 621.9 653.2 622.0 738.8 ------- ------- ------- ------- GROSS PROFIT ....................................... 115.7 124.1 112.5 132.4 ------- ------- ------- ------- OPERATING PROFIT (LOSS) NMHG Wholesale ................................... 27.9 26.1 8.3 12.2 NMHG Retail (including eliminations) ............ (3.1) (3.3) (2.6) (7.2) Housewares ....................................... -- 8.3 9.9 23.6 NACoal ........................................... 9.2 8.6 11.4 11.2 NACCO and Other .................................. (2.6) (2.5) (2.4) (1.7) ------- ------- ------- ------- 31.4 37.2 24.6 38.1 ------- ------- ------- ------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 12.9 16.3 7.0 18.1 Cumulative effect of accounting change ............. (1.2) -- -- -- ------- ------- ------- ------- NET INCOME ......................................... $ 11.7 $ 16.3 $ 7.0 $ 18.1 ======= ======= ======= ======= BASIC AND DILUTED EARNINGS PER SHARE Income before cumulative effect of accounting change $ 1.59 $ 2.00 $ 0.86 $ 2.22 Cumulative effect of accounting change ............. (.15) -- -- -- ------- ------- ------- ------- Net income ......................................... $ 1.44 $ 2.00 $ 0.86 $ 2.22 ======= ======= ======= =======
As discussed in Note 2, the Company adopted EITF 00-10 in the fourth quarter of 2000. As a result, consolidated revenues for the Company and the affected segment's revenues, NMHG Wholesale, have been restated for each of the quarters in 2000 and 1999. A reconciliation of the restated revenues to revenues as previously reported is as follows:
2000 ---------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- REVENUES NMHG Wholesale revenues, as previously disclosed $ 429.3 $ 440.9 $ 406.4 $ 437.0 Reclassification of freight revenues ........... 8.7 9.1 7.9 10.7 -------- -------- -------- -------- Restated revenues ............................ $ 438.0 $ 450.0 $ 414.3 $ 447.7 ======== ======== ======== ======== Consolidated revenues, as previously disclosed . $ 673.2 $ 697.3 $ 691.9 $ 772.5 Reclassification of freight revenues ........... 8.7 9.1 7.9 10.7 -------- -------- -------- -------- Restated revenues ............................ $ 681.9 $ 706.4 $ 699.8 $ 783.2 ======== ======== ======== ========
1999 ---------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- REVENUES NMHG Wholesale revenues, as previously disclosed $ 417.0 $ 412.1 $ 356.9 $ 399.8 Reclassification of freight revenues ........... 8.4 8.5 7.7 8.5 -------- -------- -------- -------- Restated revenues ............................ $ 425.4 $ 420.6 $ 364.6 $ 408.3 ======== ======== ======== ======== Consolidated revenues, as previously disclosed . $ 613.5 $ 644.7 $ 614.3 $ 730.3 Reclassification of freight revenues ........... 8.4 8.5 7.7 8.5 -------- -------- -------- -------- Restated revenues ............................ $ 621.9 $ 653.2 $ 622.0 $ 738.8 ======== ======== ======== ========
67 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 22 - PARENT COMPANY CONDENSED BALANCE SHEETS The condensed balance sheets of NACCO, the parent company, at December 31 are as follows: 2000 1999 ------- ------- ASSETS Current assets ................................ $ .1 $ .2 Current intercompany accounts receivable, net . -- .4 Other assets .................................. .4 .4 Note receivable from subsidiary ............... 8.4 -- Investment in subsidiaries NMHG ....................................... 463.0 468.7 Housewares ................................. 170.9 163.9 NACoal ..................................... 31.2 23.2 Bellaire ................................... 2.2 .5 ------- ------- 667.3 656.3 Property, plant and equipment, net ............ .4 1.2 Deferred income taxes ......................... 1.1 20.6 ------- ------- Total Assets ............................. $ 677.7 $ 679.1 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities ........................... $ 9.3 $ 8.5 Current intercompany accounts payable, net .... 3.8 -- Reserve for future interest on UMWA obligation -- 55.3 Note payable to Bellaire ...................... 50.3 36.0 Notes payable to other subsidiaries ........... 3.0 12.7 Deferred income taxes and other ............... 4.9 4.4 Stockholders' equity .......................... 606.4 562.2 ------- ------- Total Liabilities and Stockholders' Equity $ 677.7 $ 679.1 ======= ======= The credit agreements at NMHG, HB-PS and NACoal allow the transfer of assets to NACCO under certain circumstances. The amount of NACCO's investment in NMHG, HB-PS and NACoal that was restricted at December 31, 2000 totals approximately $554.2 million. Dividends, advances and management fees from its subsidiaries are the primary sources of cash for NACCO. 68 47 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 accounting principles generally accepted in the United States 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 LLP, independent certified public accountants, audits NACCO Industries, Inc. and its subsidiaries' financial statements. Its audits are conducted in accordance with auditing standards generally accepted in the United States 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 Review 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 Review Committee. The Audit Review Committee also reviews the financial reporting process and accounting policies of NACCO Industries, Inc. and each of its subsidiaries. /s/ Alfred M. Rankin, Jr. Alfred M. Rankin, Jr. Chairman, President and Chief Executive Officer /s/ Kenneth C. Schilling Kenneth C. Schilling Vice President and Controller 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, 2000 and 1999, and the related Consolidated Statements of Income and Comprehensive Income, Stockholders' Equity and Cash Flows for each of the three years in the period ended December 31, 2000. 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 auditing standards generally accepted in the United States. 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, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. As explained in Note 2 to the Consolidated Financial Statements, effective January 1, 1999, the Company adopted the American Institute of Certified Public Accountants Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" and changed its method of accounting for start-up activities. /s/ Arthur Andersen LLP Arthur Andersen LLP Cleveland, Ohio, February 13, 2001. 69 EX-21 19 l87125bex21.txt EXHIBIT 21 1 EXHIBIT 21 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 Hamilton Beach/Proctor-Silex de Mexico, S.A. de C.V. Mexico Housewares Holding Company Delaware HB-PS Holding Company, Inc. Delaware Hyster-Yale Materials Handling, Inc. Delaware The Kitchen Collection, Inc. Delaware Mississippi Lignite Mining Company Texas NACCO Materials Handling Group, Inc. Delaware NACCO Materials Handling Group, Ltd. England NACCO Materials Handling Group, Pty., Ltd. Australia NACCO Materials Handling, B.V. Netherlands NACCO Materials Handling, S.r.l. Italy NACCO Materials Handling Limited England NMH Holding, B.V. Netherlands NMHG Distribution B.V. Netherlands NMHG Distribution Co. Delaware NHMG Distribution Pty. Limited Australia NMHG Holding Co. Delaware NMHG Mexico S.A. de C.V. Mexico The North American Coal Corporation Delaware North American Coal Royalty Company Delaware Oxbow Property Company L.L.C. Louisiana Phillips Coal Land Management Corp. Nevada Powhatan Corporation Delaware Proctor-Silex Canada, Inc. Ontario (Canada) Proctor-Silex, S.A. de C.V. Mexico Red Hills Property Company L.L.C. Mississippi Red River Mining Company Texas The Sabine Mining Company Nevada
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. EX-23.I 20 l87125bex23-i.txt EXHIBIT 23(I) 1 Arthur Andersen LLP Exhibit 23(i) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference 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. /s/ Arthur Andersen LLP Cleveland, Ohio March 29, 2001 EX-24.I 21 l87125bex24-i.txt EXHIBIT 24(I) 1 Exhibit 24(i) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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: February 13, 2001 ----------------- EX-24.II 22 l87125bex24-ii.txt EXHIBIT 24(II) 1 Exhibit 24(ii) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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: February 13, 2001 ------------------ EX-24.III 23 l87125bex24-iii.txt EXHIBIT 24(III) 1 Exhibit 24(iii) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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/ Leon J. Hendrix, Jr. -------------------------------------- Leon J. Hendrix, Jr. Date: February 13, 2001 ------------------ EX-24.IV 24 l87125bex24-iv.txt EXHIBIT 24(IV) 1 Exhibit 24(iv) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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/ David H. Hoag ----------------------------------- David H. Hoag Date: February 13, 2001 ----------------- EX-24.V 25 l87125bex24-v.txt EXHIBIT 24(V) 1 Exhibit 24(v) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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: February 13, 2001 ------------------ EX-24.VI 26 l87125bex24-vi.txt EXHIBIT 24(VI) 1 Exhibit 24(vi) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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 de J. Osborne ---------------------------------- Richard de J. Osborne Date: February 13, 2001 ------------------ EX-24.VII 27 l87125bex24-vii.txt EXHIBIT 24(VII) 1 Exhibit 24(vii) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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/ Ian M. Ross ---------------------------------------- Ian M. Ross Date: February 13, 2001 ----------------- EX-24.VIII 28 l87125bex24-viii.txt EXHIBIT 24(VIII) 1 Exhibit 24(viii) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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: February 13, 2001 ----------------- EX-24.IX 29 l87125bex24-ix.txt EXHIBIT 24(IX) 1 Exibit 24(ix) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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/ David F. Taplin ------------------------------------ David F. Taplin Date: February 13, 2001 ----------------- EX-24.X 30 l87125bex24-x.txt EXHIBIT 24(X) 1 Exhibit 24(x) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, 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, 2000, 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 F. Turben -------------------------------------- John F. Turben Date: February 13, 2001 ----------------- EX-99.I 31 l87125bex99-i.txt EXHIBIT 99(I) 1 Exhibit 99(i) NACCO Industries, Inc. Unaudited Consolidating Statement of Income and Comprehensive Income For the Year Ended December 31, 2000 (In millions)
NMHG ------------------------------------------------------------ Wholesale Retail Elims Consolidated ------------- ----------- ---------- ----------------- Net sales $ 1,750.0 $ 280.3 $ (98.2) $ 1,932.1 Other operating revenues - - - - ------------- ----------- ---------- ----------------- Revenues 1,750.0 280.3 (98.2) 1,932.1 Cost of sales 1,457.1 226.2 (98.7) 1,584.6 ------------- ----------- ---------- ----------------- Gross profit 292.9 54.1 0.5 347.5 Selling, general and administrative expenses 181.5 69.8 (0.9) 250.4 Restructuring charges 13.9 - - 13.9 Amortization of goodwill 11.6 1.0 - 12.6 ------------- ----------- ---------- ----------------- Operating profit(loss) 85.9 (16.7) 1.4 70.6 Other income (expense) Interest expense (13.4) (4.6) (3.2) (21.2) Closed mine obligations - - - - Other-net (12.0) 0.3 (0.1) (11.8) ------------- ----------- ---------- ----------------- (25.4) (4.3) (3.3) (33.0) ------------- ----------- ---------- ----------------- Income before income taxes, minority interest and extraordinary gain 60.5 (21.0) (1.9) 37.6 Provision for income taxes 24.6 (6.7) (0.5) 17.4 ------------- ----------- ---------- ----------------- Income before minority interest and extraordinary gain 35.9 (14.3) (1.4) 20.2 Minority interest income (expense) 1.1 - - 1.1 ------------- ----------- ---------- ----------------- Income before extraordinary gain 37.0 (14.3) (1.4) 21.3 Extraordinary gain, net of $16.1 tax benefit - - - - ------------- ----------- ---------- ----------------- Net income (loss) $ 37.0 $ (14.3) $ (1.4) $ 21.3 ============= =========== ========== ================= Change in comprehensive income (17.1) 0.1 - (17.0) ------------- ----------- ---------- ----------------- Comprehensive income (loss) $ 19.9 $ (14.2) $ (1.4) $ 4.3 ============= =========== ========== =================
NACoal ------------------------------------------------- Project NACoal Mines excl Proj Housewares Subsidiaries Mines Consolidated --------------- --------------- ------------ ---------------- Net sales $ 649.9 $ 249.7 $ 36.8 $ 286.5 Other operating revenues - 0.8 1.9 2.7 --------------- --------------- ------------ ---------------- Revenues 649.9 250.5 38.7 289.2 Cost of sales 530.1 205.5 34.7 240.2 --------------- --------------- ------------ ---------------- Gross profit 119.8 45.0 4.0 49.0 Selling, general and administrative expenses 87.6 3.0 14.4 17.4 Restructuring charges 1.7 - - - Amortization of goodwill 3.1 - - - --------------- --------------- ------------ ---------------- Operating profit(loss) 27.4 42.0 (10.4) 31.6 Other income (expense) - Interest expense (8.6) (16.9) (0.7) (17.6) Closed mine obligations - - - - Other-net (2.6) 0.4 (0.9) (0.5) --------------- --------------- ------------ ---------------- (11.2) (16.5) (1.6) (18.1) --------------- --------------- ------------ ---------------- Income before income taxes, minority interest and extraordinary gain 16.2 25.5 (12.0) 13.5 Provision for income taxes 7.4 5.8 (5.9) (0.1) --------------- --------------- ------------ ---------------- Income before minority interest and extraordinary gain 8.8 19.7 (6.1) 13.6 Minority interest income (expense) - - (1.0) (1.0) --------------- --------------- ------------ ---------------- Income before extraordinary gain 8.8 19.7 (7.1) 12.6 Extraordinary gain, net of $16.1 tax benefit - - - - --------------- --------------- ------------ ---------------- Net income (loss) $ 8.8 $ 19.7 $ (7.1) $ 12.6 =============== =============== ============ ================ Change in comprehensive income (0.1) - - - --------------- --------------- ------------ ---------------- Comprehensive income (loss) $ 8.7 $ 19.7 $ (7.1) $ 12.6 =============== =============== ============ ================
NACCO & NACCO Other Elims Consolidated ------------- -------- ---------------- Net sales $ 0.1 $ - $ 2,868.6 Other operating revenues - - 2.7 ------------- -------- ---------------- Revenues 0.1 - 2,871.3 Cost of sales 0.2 - 2,355.1 ------------- -------- ---------------- Gross profit (0.1) - 516.2 Selling, general and administrative expenses 11.6 - 367.0 Restructuring charges - - 15.6 Amortization of goodwill - - 15.7 ------------- -------- ---------------- Operating profit(loss) (11.7) - 117.9 Other income (expense) - Interest expense (0.2) 0.5 (47.1) Closed mine obligations (5.6) - (5.6) Other-net 10.2 (0.5) (5.2) ------------- -------- ---------------- 4.4 - (57.9) ------------- -------- ---------------- Income before income taxes, minority interest and extraordinary gain (7.3) - 60.0 Provision for income taxes (2.4) - 22.3 ------------- -------- ---------------- Income before minority interest and extraordinary gain (4.9) - 37.7 Minority interest income (expense) - - 0.1 ------------- -------- ---------------- Income before extraordinary gain (4.9) - 37.8 Extraordinary gain, net of $16.1 tax benefit 29.9 - 29.9 ------------- -------- ---------------- Net income (loss) $ 25.0 $ - $ 67.7 ============= ======== ================ Change in comprehensive income - (0.1) (17.2) ------------- -------- ---------------- Comprehensive income (loss) $ 25.0 $ (0.1) $ 50.5 ============= ======== ================
EX-99.II 32 l87125bex99-ii.txt EXHIBIT 99(II) 1 Exhibit 99(ii) NACCO Industries, Inc. Unaudited Consolidating Balance Sheet December 31, 2000 (In millions)
NACoal ------------------------------------------------ Project NACoal Mining excl Proj NMHG Housewares Subsidiaries Mines Consolidated ----------- --------------- ---------------- ------------ ---------------- Current Assets Cash and cash equivalents $ 24.4 $ 7.6 $ 1.4 $ 0.3 $ 1.7 Accounts receivable, net 204.0 90.1 16.5 4.8 21.3 Intercompany accounts receivable - - 3.1 5.2 8.3 Intercompany notes receivable 3.0 - 11.5 (11.5) - Inventories 283.0 93.1 28.7 7.0 35.7 Prepaid expenses and other 37.9 14.1 1.3 1.2 2.5 ----------- --------------- ---------------- ------------ ---------------- 552.3 204.9 62.5 7.0 69.5 Property, Plant and Equipment, net 286.2 64.6 266.0 91.9 357.9 Deferred Charges Goodwill, net 356.1 86.8 - - - Coal supply agreement, net - - - 86.4 86.4 Deferred costs and other 12.3 0.3 39.3 10.2 49.5 Deferred income taxes 2.7 9.7 - - - ----------- --------------- ---------------- ------------ ---------------- 371.1 96.8 39.3 96.6 135.9 Other Assets 32.1 0.1 22.1 8.6 30.7 ----------- --------------- ---------------- ------------ ---------------- Total Assets $ 1,241.7 $ 366.4 $ 389.9 $ 204.1 $ 594.0 =========== =============== ================ ============ ================ Current Liabilities Accounts payable $ 215.2 $ 32.8 $ 9.9 $ 4.3 $ 14.2 Intercompany accounts payable (5.4) 5.5 0.6 (0.1) 0.5 Revolving credit agreements 33.1 30.7 - 2.5 2.5 Current maturities of long-term debt 30.3 - - 15.1 15.1 Current obligations of project mining subsidiaries - - 37.7 - 37.7 Accrued payroll 30.3 12.0 4.3 1.8 6.1 Accrued warranty obligations 36.8 0.2 - - - Intercompany notes payable - - - 8.4 8.4 Other current liabilities 104.6 27.2 5.3 4.5 9.8 ----------- --------------- ---------------- ------------ ---------------- 444.9 108.4 57.8 36.5 94.3 Long-term Debt 241.5 80.3 - 128.2 128.2 Obligations of Project Mining Subsidiaries - - 282.7 - 282.7 Self-insurance Reserves and Other 89.2 6.8 45.6 10.9 56.5 Minority Interest 3.1 - - 1.1 1.1 Stockholders' Equity 463.0 170.9 3.8 27.4 31.2 ----------- --------------- ---------------- ------------ ---------------- Total Liabilities and Stockholders' Equity $ 1,241.7 $ 366.4 $ 389.9 $ 204.1 $ 594.0 =========== =============== ================ ============ ================
NACCO & Consolidated Other Elims NACCO ------------- ---------- ---------------- Current Assets Cash and cash equivalents $ - $ - $ 33.7 Accounts receivable, net - - 315.4 Intercompany accounts receivable 9.9 (18.2) - Intercompany notes receivable 8.4 (11.4) - Inventories - - 411.8 Prepaid expenses and other 0.6 (0.3) 54.8 ------------- ---------- ---------------- 18.9 (29.9) 815.7 Property, Plant and Equipment, net 2.0 - 710.7 Deferred Charges Goodwill, net - - 442.9 Coal supply agreement, net - - 86.4 Deferred costs and other - - 62.1 Deferred income taxes 20.5 (20.1) 12.8 ------------- ---------- ---------------- 20.5 (20.1) 604.2 Other Assets 0.4 - 63.3 ------------- ---------- ---------------- Total Assets $ 41.8 $ (50.0) $ 2,193.9 ============= ========== ================ Current Liabilities Accounts payable $ 4.3 $ (3.5) $ 263.0 Intercompany accounts payable 14.4 (15.0) - Revolving credit agreements - - 66.3 Current maturities of long-term debt - - 45.4 Current obligations of project mining subsidiaries - - 37.7 Accrued payroll 4.8 - 53.2 Accrued warranty obligations - - 37.0 Intercompany notes payable 3.0 (11.4) - Other current liabilities 6.0 - 147.6 ------------- ---------- ---------------- 32.5 (29.9) 650.2 Long-term Debt - - 450.0 Obligations of Project Mining Subsidiaries - - 282.7 Self-insurance Reserves and Other 68.0 (20.1) 200.4 Minority Interest - - 4.2 Stockholders' Equity (58.7) - 606.4 ------------- ---------- ---------------- Total Liabilities and Stockholders' Equity $ 41.8 $ (50.0) $ 2,193.9 ============= ========== ================
EX-99.III 33 l87125bex99-iii.txt EXHIBIT 99(III) 1 Exhibit 99(iii) NACCO Industries, Inc. Unaudited Consolidating Statement of Cash Flows For the Year Ended December 31, 2000 (In millions)
NMHG Housewares NACoal ----------- --------------- ----------- Operating Activities Net income $ 21.3 $ 8.8 $ 12.6 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 54.6 19.3 31.9 Deferred income taxes (12.2) (2.8) 3.9 Minority interest (income) expense (1.1) - 1.0 Extraordinary gain - - - Provision for severance 13.9 1.7 - Other non-cash items (5.1) 0.3 1.9 Working capital changes, excluding the effect of business acquisitions: Intercompany receivable/payable (1.5) 1.2 (8.6) Accounts receivable (36.3) 16.5 (3.5) Inventories (19.0) (5.2) (1.8) Other current assets 0.9 1.0 (0.7) Accounts payable and other liabilities 47.1 (16.4) 2.7 ----------- --------------- ----------- Net cash provided by (used for) operating activities 62.6 24.4 39.4 ----------- --------------- ----------- Investing Activities Expenditures for property, plant and equipment (51.8) (22.0) (19.2) Proceeds from the sale of property, plant, and equipment 10.1 2.6 1.2 Acquisitions of businesses, net of cash acquired (16.6) - (128.7) Investments in unconsolidated affiliates (1.4) - (8.9) Intercompany loans 7.0 - 11.1 Other - net - - (1.2) ----------- --------------- ----------- Net cash used for investing activities (52.7) (19.4) (145.7) ----------- --------------- ----------- Financing Activities Additions to long-term debt and revolving credit agreements 38.6 1.9 145.5 Reductions to long-term debt and revolving credit agreements (46.1) (0.4) (15.2) Additions to obligations of project mining subsidiaries - - 53.7 Reductions of obligations of project mining subsidiaries - - (70.3) Deferred financing fees - - (1.8) Cash dividends paid (10.0) (1.7) (4.6) Capital grants 0.4 - - Other-net - - (1.5) ----------- --------------- ----------- Net cash provided by (used for) financing activities (17.1) (0.2) 105.8 ----------- --------------- ----------- Effect of exchange rate changes on cash 0.5 (0.1) - ----------- --------------- ----------- Cash and Cash Equivalents Increase (decrease) for the year (6.7) 4.7 (0.5) Balance at the beginning of the year 31.1 2.9 2.2 ----------- --------------- ----------- Balance at the end of the year $ 24.4 $ 7.6 $ 1.7 =========== =============== ===========
NACCO NACCO and Other Consolidated ------------ ---------------- Operating Activities Net income $ 25.0 $ 67.7 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 0.3 106.1 Deferred income taxes (1.4) (12.5) Minority interest (income) expense - (0.1) Extraordinary gain (29.9) (29.9) Provision for severance - 15.6 Other non-cash items 3.0 0.1 Working capital changes, excluding the effect of business acquisitions: - Intercompany receivable/payable 8.9 - Accounts receivable (1.6) (24.9) Inventories - (26.0) Other current assets - 1.2 Accounts payable and other liabilities 2.3 35.7 ------------ ---------------- Net cash provided by (used for) operating activities 6.6 133.0 ------------ ---------------- Investing Activities Expenditures for property, plant and equipment (0.3) (93.3) Proceeds from the sale of property, plant, and equipment 1.4 15.3 Acquisitions of businesses, net of cash acquired - (145.3) Investments in unconsolidated affiliates - (10.3) Intercompany loans (18.1) - Other - net 0.6 (0.6) ------------ ---------------- Net cash used for investing activities (16.4) (234.2) ------------ ---------------- Financing Activities Additions to long-term debt and revolving credit agreements - 186.0 Reductions to long-term debt and revolving credit agreements - (61.7) Additions to obligations of project mining subsidiaries - 53.7 Reductions of obligations of project mining subsidiaries - (70.3) Deferred financing fees - (1.8) Cash dividends paid 9.1 (7.2) Capital grants - 0.4 Other-net 0.7 (0.8) ------------ ---------------- Net cash provided by (used for) financing activities 9.8 98.3 ------------ ---------------- Effect of exchange rate changes on cash - 0.4 ------------ ---------------- Cash and Cash Equivalents Increase (decrease) for the year - (2.5) Balance at the beginning of the year - 36.2 ------------ ---------------- Balance at the end of the year $ - $ 33.7 ============ ================
EX-99.IV 34 l87125bex99-iv.txt EXHIBIT 99(IV) 1 Exhibit 99(iv) NACCO Industries, Inc. Unaudited Consolidating Statement of Stockholders' Equity For the Year Ended December 31, 2000 (In millions)
NACCO & NMHG NACoal Housewares Other --------------- ----------- --------------- ------------- Class A Common Stock $ - $ - $ - $ 6.5 --------------- ----------- --------------- ------------- Class B Common Stock - - - 1.6 --------------- ----------- --------------- ------------- Capital In Excess of Par Value Beginning balance 198.2 15.1 160.6 2.7 Shares issued under stock option and compensation plans - - - 0.9 --------------- ----------- --------------- ------------- 198.2 15.1 160.6 3.6 Retained Earnings Beginning balance 272.6 8.1 5.3 489.6 Net income (loss) 21.3 12.6 8.8 25.0 Cash dividends (10.0) (4.6) (1.7) (7.2) --------------- ----------- --------------- ------------- 283.9 16.1 12.4 507.4 Accumulated Other Comprehensive Income (Loss) Beginning balance (2.1) - (2.0) - Foreign currency translation adjustment and other (17.0) - (0.1) - --------------- ----------- --------------- ------------- (19.1) - (2.1) - --------------- ----------- --------------- ------------- Total Stockholders' Equity $ 463.0 $ 31.2 $ 170.9 $ 519.1 =============== =========== =============== =============
NACCO Elims Consolidated ----------- --------------- Class A Common Stock $ - $ 6.5 ----------- --------------- Class B Common Stock - 1.6 ----------- --------------- Capital In Excess of Par Value Beginning balance (373.9) 2.7 Shares issued under stock option and compensation plans - 0.9 ----------- --------------- (373.9) 3.6 Retained Earnings Beginning balance (221.2) 554.4 Net income (loss) - 67.7 Cash dividends 16.3 (7.2) ----------- --------------- (204.9) 614.9 Accumulated Other Comprehensive Income (Loss) Beginning balance 1.1 (3.0) Foreign currency translation adjustment and other (0.1) (17.2) ----------- --------------- 1.0 (20.2) ----------- --------------- Total Stockholders' Equity $ (577.8) $ 606.4 =========== ===============
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