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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K ANNUAL REPORT
PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NO. 1-9172
NACCO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
5875 Landerbrook Drive,
Mayfield Heights, Ohio
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
34-1505819
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(I.R.S. EMPLOYER IDENTIFICATION NO.)
44124-4017
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(ZIP CODE)
Registrant's telephone number, including area code: (216) 449-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Class A Common Stock, New York Stock Exchange
Par Value $1.00 Per Share
</TABLE>
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 29, 1996:
$337,680,093
Number of shares of Class A Common Stock outstanding at February 29, 1996:
7,273,956
Number of shares of Class B Common Stock outstanding at February 29, 1996:
1,708,993
DOCUMENTS INCORPORATED BY REFERENCE
(a) The Company's Proxy Statement for its 1996 annual meeting of
stockholders, incorporated herein by reference in Part III.
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ITEM 1. BUSINESS
GENERAL
NACCO Industries, Inc. ("NACCO" or the "Company") is a holding company
which owns four principal operating subsidiaries:
(a) Nacco Materials Handling Group. The Company owns approximately 97% of
the outstanding capital stock of Hyster-Yale Materials Handling, Inc.
("Hyster-Yale"), which is the parent company of NACCO Materials Handling Group,
Inc. (For convenience of reference NACCO Materials Handling Group, Inc. and
Hyster-Yale hereinafter referred to as "NMHG"). NMHG markets two full lines of
forklift trucks and related service parts under the Hyster and Yale brand names.
NMHG accounted for 69% and 57% of NACCO's revenues and operating profits,
respectively, in 1995.
(b) Hamilton Beach/Proctor-Silex. The Company owns 80% of Hamilton
Beach/Proctor-Silex, Inc. ("Hamilton Beach/Proctor-Silex"), one of the nation's
leading manufacturers and marketers of small electric appliances. Hamilton
Beach/Proctor-Silex accounted for 17% of NACCO's revenues and operating profits
in 1995.
(c) North American Coal. The Company's wholly owned subsidiary, The North
American Coal Corporation, and its affiliated coal companies (collectively,
"North American Coal"), mine and market lignite for use primarily as fuel for
power generation by electric utilities. North American Coal also provides
dragline mining services for a limerock quarry near Miami, Florida. North
American Coal accounted for 11% and 30% of NACCO's revenues and operating
profits, respectively, in 1995.
(d) Kitchen Collection. The Company's wholly owned subsidiary, The Kitchen
Collection, Inc. ("Kitchen Collection"), is a national specialty retailer of
kitchenware, small electric appliances and related accessories. Kitchen
Collection accounted for 3% and 2% of NACCO's revenues and operating profits,
respectively, in 1995.
Additional information relating to financial and operating data on a
segment basis (including NACCO and Other, which reduced operating profits by 6%
in 1995) is set forth in Management's Discussion and Analysis of Results of
Operations and Financial Condition on pages 21 through 36 contained in Part II
hereof and in Note 19 to the Consolidated Financial Statements on pages F-22
through F-24 contained in Part IV hereof.
NACCO was incorporated as a Delaware corporation in 1986 in connection with
the formation of a holding company structure for a predecessor corporation
organized in 1913.
SIGNIFICANT EVENTS
In August 1995, NMHG retired the remaining $78.5 million outstanding
Hyster-Yale 12 3/8% subordinated debentures, using bank borrowings and
internally generated funds. This retirement resulted in a charge in the third
quarter of $2.1 million, representing the write-off of premiums and unamortized
debt issuance costs. In addition, a $1.3 million charge was recognized in the
first quarter of 1995 when NMHG's former revolving credit facility and senior
term loan were replaced by a new long-term credit agreement.
In the fourth quarter, Bellaire Corporation, a non-operating subsidiary of
NACCO, reported an extraordinary gain of $32.3 million, net of $19.8 million in
taxes, relating to a downward revision in the obligation to the United Mine
Workers of America Combined Benefit fund ("UMWA"). This obligation was
recognized by Bellaire as an extraordinary charge in 1992 to accrue for the
estimated costs associated with the Coal Industry Retiree Health Benefit Act of
1992 ("Coal Act"). It is the company's policy to periodically review the
estimates and assumptions upon which various liability reserves are based. As a
result of a review of the assumptions relating to the number of company and
industry covered beneficiaries ultimately assigned to Bellaire, and the trend of
health care costs, the aggregate estimated costs associated with the Coal Act
are expected to be lower than originally anticipated. Management believes that
the revised liability of $69.3 million, net of deferred taxes, more accurately
represents the future cost of this obligation.
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Effective February 28, 1995, George C. Nebel resigned as President and
Chief Executive Officer of Hamilton Beach/Proctor-Silex. On September 11, 1995,
Richard E. Posey joined Hamilton Beach/Proctor-Silex as President and Chief
Executive Officer. In the interim, Hamilton Beach/Proctor-Silex was managed by
Alfred M. Rankin, Jr., Chairman, President and Chief Executive Officer of the
Company, as nonexecutive chairman of the Hamilton Beach/Proctor-Silex Board of
Directors, with daily operations being overseen by an executive committee
comprised of key Hamilton Beach/Proctor-Silex executives from various
disciplines.
BUSINESS SEGMENT INFORMATION
A. NACCO MATERIALS HANDLING GROUP
NMHG is one of the leading worldwide designers, manufacturers and marketers
of forklift trucks which comprise the largest segment of the materials handling
equipment industry. NMHG accounted for 57% and 48% of NACCO's assets and
liabilities, respectively, as of December 31, 1995, while its operations
accounted for 69% and 57% of NACCO's revenues and operating profits,
respectively, in 1995.
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.
Since 1990, the worldwide market for forklift trucks has remained
relatively stable at approximately 400,000 units per year. During this time,
however, individual geographic markets have been subject to cyclicality. During
the most recent business cycle, the North American market for forklift trucks
reached its lowest level in 1991 and management believes has recently peaked and
now leveled off. The European and Japanese markets reversed a declining trend in
1994 and continued a strong upward movement in 1995, particularly in Europe. The
market in Asia-Pacific (outside of Japan), an increasingly important market for
NMHG, continued steady growth to a record level in 1995.
COMPANY OPERATIONS
NMHG maintains product differentiation between Hyster and Yale brands of
forklift trucks and distributes its products through separate worldwide dealer
networks. Nevertheless, certain overlapping operations have been integrated to
take advantage of economies of scale in design, manufacturing and purchasing.
NMHG provides all design, manufacturing and administrative functions. Products
are marketed and sold through two separate dealer networks which retain the
Hyster and Yale identities. In Japan, NMHG has a 50% owned joint venture with
Sumitomo Heavy Industries Ltd. which is generally known as Sumitomo-NACCO
Company Limited ("S-N"). S-N performs certain design activities and produces
lift trucks and components which it markets in Japan and which are exported for
sale by NMHG and its affiliates in the U.S., Europe and Asia-Pacific.
In 1995, NMHG acquired DECA S.r.1., a manufacturer of European warehouse
equipment located in Italy. This acquisition gives the company a presence in the
substantial European warehouse equipment market. The company intends to leverage
DECA's stong product line through its extensive independent dealer network in
Europe.
PRODUCT LINES
NMHG 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 85%,
82%, and 80% of NMHG's net sales in 1995, 1994, and 1993, respectively.
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NMHG also derives significant revenues from the sale of service parts for
its products. Profit margins on service parts are greater than those on forklift
trucks. The large population of Hyster and Yale forklift trucks now in service
provides a market for service parts. In addition to parts for its own forklift
trucks, NMHG has a program (termed UNISOURCE) in North America and (termed
MULTIQUIP) in Europe designed to supply Hyster dealers with replacement parts
for most competing brands of forklift trucks. NMHG has a similar program (termed
PREMIER) for its Yale dealers in the Americas and Europe. Accordingly, NMHG
dealers can offer their mixed fleet customers a "one stop" supply source.
Certain of these parts are manufactured by and purchased from third party
component makers. NMHG also manufactures some of these parts through
reverse-engineering of its competitors' parts. Service parts accounted for
approximately 15%, 18%, and 20% of NMHG net sales in 1995, 1994, and 1993,
respectively.
COMPETITION
The forklift truck industry is highly competitive. The worldwide
competitive structure of the industry is fragmented by product line and country;
however, the three largest manufacturers have 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 competes with alternative methods of materials handling, including
conveyor systems, automated guided vehicle systems and hand labor. Global
competition is also affected by a number of other factors, including currency
fluctuations, variations in labor costs and effective tax rates, and the costs
related to compliance with applicable regulations, including export restraints,
antidumping provisions and environmental regulations.
Although there is no official source for information on the subject, NACCO
believes that NMHG is the top manufacturer of forklift trucks in the world based
on number of lift trucks sold.
NMHG's position is strongest in North America, where it believes it is the
leader in unit sales of electric rider and ICE forklift trucks and has a
significant share of unit sales of electric narrow-aisle and electric motorized
hand forklift trucks. Although the European market is fragmented and competitive
positions vary from country to country, NMHG believes that it has a significant
share of unit sales of electric rider and ICE forklift trucks in Western Europe.
Although NMHG's current market share in the Asia-Pacific and Japanese markets is
lower than in other geographic areas they have been targeted for additional
market share growth. Since 1990, Asia-Pacific market share has shown moderate
growth while Japanese market share has remained stable.
TRADE RESTRICTIONS
A. UNITED STATES
Since June 1988, Japanese-built ICE forklift trucks imported into the U.S.,
with lifting capacities between 2,000 and 15,000 pounds, including finished and
unfinished forklift trucks, chassis, frames, and frames assembled with one or
more component parts, have been subject to an antidumping duty order.
Antidumping duty rates in effect through 1995 range from 4.48% to 56.81%
depending on manufacturer or importer. The antidumping duty rate applicable to
imports from S-N is 51.33%, and is likely to continue unchanged for the
foreseeable future, unless S-N and NMHG decide to participate in proceedings to
have it reduced. NMHG does not currently import for sale in the United States
any forklift trucks or components subject to the antidumping duty order. This
antidumping duty order will remain in effect until the Japanese manufacturers
and importers satisfy the U.S. Department of Commerce ("Commerce") that they
have not individually sold merchandise subject to the order in the United States
below foreign market value for at least three consecutive years, or unless
Commerce or the U.S. International Trade Commission finds that changed
circumstances exist sufficient to warrant the revocation of the order. The
legislation implementing the Uruguay round of GATT negotiations passed in 1994
provides that the anti-dumping order will be reviewed for possible revocation in
2000. All of NMHG's major Japanese competitors have either built or acquired
manufacturing or assembly facilities in the United States. The company cannot
predict with any certainty if
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there has been or will be any negative effects to the company resulting from the
Japanese sourcing of their forklift products in the United States.
B. EUROPE
From 1986 through 1994, Japanese forklift truck manufacturers were subject
to informal export restraints on Japanese-manufactured electric rider, electric
narrow-aisle and ICE forklift trucks shipped to Europe. These informal
restraints terminated in 1995. Several Japanese manufacturers have announced
either that they have established, or intend to establish, manufacturing or
assembly facilities within the European Community. The company also cannot
predict with any certainty if there has been or will be any negative effects to
NMHG resulting from the Japanese sourcing of their forklift products in Europe.
PRODUCT DESIGN AND DEVELOPMENT
NMHG spent $24.2 million, $23.2 million, and $20.7 million on product
design and development activities in 1995, 1994, and 1993, respectively. The
Hyster(R) and Yale(R) products are differentiated for the specific needs of
their respective customer bases. NMHG continues to pursue opportunities to
improve product costs by engineering new Hyster(R) and Yale(R) brand products
with component commonality.
Certain product design and development activities with respect to ICE
forklift trucks and some components are performed in Japan by S-N. S-N spent
approximately $3.8 million, $4.5 million, and $4.0 million on product design and
development in 1995, 1994, and 1993, respectively.
BACKLOG
As of December 31, 1995, NMHG's backlog of unfilled orders for forklift
trucks was approximately 21,200 units, or $385 million. This compares to the
backlog as of December 31, 1994 of approximately 24,600 units, or $433 million.
The continuation of strong orders and vendor part shortages in 1995 caused
backlog levels to remain high. The company's management believes that NMHG
backlog levels are consistent with the overall industry. Backlog represents unit
orders to NMHG's manufacturing plants from independent dealerships, retail
customers and contracts with the U.S. Government. Although these orders are
believed to be firm, such orders may be subject to cancellation or modification.
SOURCES
NMHG has adopted a strategy of obtaining its raw materials and principal
components on a global basis from competitively priced sources. NMHG is
dependent on a limited number of suppliers for certain of its critical
components, including diesel and gasoline engines and cast-iron counterweights
used on certain forklift trucks. There would be a material adverse effect on
NMHG if it were unable to obtain all or a significant part of such components,
or if the cost of such components was to increase significantly under
circumstances which prevented NMHG from passing on such increases to its
customers. In 1995, NMHG suffered vendor part shortages which caused backlog
levels to remain high.
DISTRIBUTION
The Hyster(R) and Yale(R) brand products are distributed through separate
highly developed worldwide dealer networks. Each also sells directly to certain
major customers. In addition, the company has an internal sales forces for each
brand to sell directly to major customers.
In Japan, forklift truck products are distributed by S-N. In 1995, Yale
reached agreement with Jungheinrich Aktiengesellschaft ("Jungheinrich"), a
German manufacturer of forklift trucks, to terminate Jungheinrich's distribution
of Yale brand products in Germany and Austria at the end of 1996. By mid-1997,
NMHG will cease to provide to Jungheinrich certain ICE and electric-powered
products for sale in other major European countries under the Jungheinrich brand
name. Yale will establish a new distribution network in Germany and will begin
appointing German dealers in October 1996. The company's management does not
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believe that the termination of its relationship with Jungheinrich will have a
materially adverse effect on the company.
FINANCING OF SALES
Hyster U.S. dealer and direct sales are supported by leasing and financing
services provided by Hyster Credit Company, a division of AT&T Commercial
Finance Corporation, pursuant to an operating agreement which expires in 2000.
NMHG is a minority stockholder of Yale Financial Services, Inc., a
subsidiary of General Electric Capital Corporation, which offers Yale U.S.
dealers wholesale and retail financing and leasing services for its forklift
trucks. Such retail financing and leasing services are also available to Yale
national account customers.
EMPLOYEES
As of February 29, 1996, NMHG had approximately 6,900 employees. Employees
in the Danville, Illinois manufacturing and parts depot operations are
unionized, as are tool room employees located in Portland, Oregon. A new
three-year contract for the Danville union employees was signed in 1994, which
will expire in June, 1997. A new three-year contract was signed in 1994 with the
Portland tool room union which will expire in October 1997. 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, Netherlands
facilities are not represented by unions. The employees in Nijmegen have
organized a works council, as required by Dutch law, which performs a
consultative role on employment matters.
NMHG's management believes its current labor relations with both union and
non-union employees are generally satisfactory.
GOVERNMENT REGULATION
NMHG's manufacturing facilities, in common with others in industry, are
subject to numerous laws and regulations designed to protect the environment,
particularly with respect to disposal of plant waste. NMHG's products are also
subject to various industry and governmental standards. NMHG's management
believes that the impact of expenditures to comply with such requirements will
not have a material adverse effect on NMHG.
PATENTS, TRADEMARKS AND LICENSES
NMHG is not materially dependent upon patents or patent protection. NMHG is
the owner of the Hyster(R) trademark, which is currently registered in
approximately 51 countries. The Yale(R) trademark, which is used on a perpetual
royalty-free basis by NMHG in connection with the manufacture and sale of
forklift trucks and related components, is currently registered in approximately
100 countries. NMHG's management believes that its business is not dependent
upon any individual trademark registration or license, but that the Hyster(R)
and Yale(R) trademarks are material to its business.
B. HAMILTON BEACH/PROCTOR-SILEX
GENERAL
The company believes that Hamilton Beach/Proctor-Silex is one of the
largest broad line manufacturers and marketers of small electric appliances in
North America. Hamilton Beach/Proctor-Silex's products are marketed primarily to
retail merchants and wholesale distributors. Hamilton Beach/Proctor-Silex
accounted for 16% and 12% of NACCO's assets and liabilities, respectively, as of
December 31, 1995, while its operations accounted for 17% of NACCO's revenues
and operating profits, in 1995.
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SALES AND MARKETING
Hamilton Beach/Proctor-Silex manufactures and markets a wide range of small
electric appliances, including motor driven appliances such as blenders, food
processors, mixers and electric knives which are primarily marketed under the
Hamilton Beach(R) brand name, and heat generating appliances such as toasters,
irons, coffeemakers and toaster ovens which are primarily marketed under the
Proctor-Silex(R) brand name. The company markets its products primarily in North
America, but also sells in South America, Latin America and Europe. Sales are
generated predominately by a network of inside sales employees to mass
merchandisers, catalog showrooms, warehouse membership clubs, variety store
chains, department stores and other retail outlets. Principal customers include
Wal-Mart, Target, K-Mart, Caldor, SAM'S Club, Montgomery Ward, Service
Merchandise, Canadian Tire and Zellers. Sales promotional activities are
primarily focused on cooperative advertising.
Because of the seasonal nature of the markets for small electric
appliances, Hamilton Beach/Proctor-Silex's management believes that backlog is
not a meaningful indicator of performance nor is it a significant indicator of
annual sales. Backlog of orders as of December 31, 1995 was approximately $4.6
million. This compares with the aggregate backlog as of December 31, 1994 of
approximately $8.2 million. This backlog represents customer orders; customer
orders may be cancelled at any time prior to shipment.
Hamilton Beach/Proctor-Silex's warranty program to the consumer consists
generally of a limited warranty lasting for two years for electric appliances.
Under its warranty program, the company may repair or replace, at its option,
those products found to contain manufacturing defects.
Revenues and operating profit for Hamilton Beach/Proctor-Silex are
traditionally greater in the second half of the year as sales of small electric
appliances increase significantly with the fall holiday selling season. Because
of the seasonality of purchases of its products, Hamilton Beach/Proctor-Silex
incurs substantial short-term debt in the first half of the year to finance
inventories and accounts receivable.
PRODUCT DESIGN AND DEVELOPMENT
Hamilton Beach/Proctor-Silex spent $3.3 million in 1995, $2.7 million in
1994 and $2.7 million in 1993 on product design and development activities.
SOURCES
The principal raw materials used to manufacture and distribute Hamilton
Beach/Proctor-Silex's products are steel, aluminum, plastics and packaging
materials. The company's management believes that adequate quantities of raw
materials are available from various suppliers.
On November 28, 1994, the parent company of one of Hamilton
Beach/Proctor-Silex's principal suppliers of molded plastic, Southern Tech
Plastics Products, Inc., entered into Chapter 11 bankruptcy proceedings. On
November 27, 1995, a wholly owned subsidiary of Hamilton Beach/Proctor- Silex
purchased the stock of the operating subsidiary of Southern Tech Plastics
Products, Inc. and now operates the molded plastic facility. This purchase did
not have a material effect on Hamilton Beach/Proctor-Silex.
COMPETITION
The small electric appliance industry is highly competitive. Based on
publicly available information about the industry, Hamilton
Beach/Proctor-Silex's management believes it is one of the largest producers of
such appliances in North America.
As retailers generally purchase a limited selection of small electric
appliances, Hamilton Beach/Proctor-Silex competes with other suppliers for
retail shelf space and focuses its marketing efforts on retailers rather than
consumers. The company's management believes that the principal areas of
competition with respect to its products are quality, price, product design,
product features, merchandising, promotion and warranty. Hamilton
Beach/Proctor-Silex's management believes that it is competitive in all of these
areas.
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GOVERNMENT REGULATION
Hamilton Beach/Proctor-Silex, in common with other manufacturers, is
subject to numerous Federal and state health, safety and environmental
regulations. The company's management believes that the impact of expenditures
to comply with such laws will not have a material adverse effect on Hamilton
Beach/Proctor-Silex. The company's products are subject to testing or regulation
by Underwriters' Laboratories, the Canadian Standards Association, and various
entities in foreign countries which review product design.
PATENTS, TRADEMARKS, COPYRIGHTS, AND LICENSES
Hamilton Beach/Proctor-Silex holds patents and trademarks registered in the
United States and foreign countries for various products. The company's
management believes that its business is not dependent upon any individual
patent, trademark, copyright or license, but that the Hamilton Beach(R) and
Proctor-Silex(R) trademarks are material to its business.
EMPLOYEES
As of February 29, 1996, Hamilton Beach/Proctor-Silex's work force
consisted of approximately 3,700 employees, none of which are represented by
unions except for approximately 20 hourly employees at the Picton, Ontario
facility. The Picton, Ontario employees are represented by an employee
association which performs a consultative role on employment matters.
C. NORTH AMERICAN COAL
GENERAL
North American Coal is engaged in the mining and marketing of lignite for
use primarily as fuel for power generation by electric utilities. Substantially
all of the sales by North American Coal are made through wholly owned project
mining subsidiaries pursuant to long-term, cost plus a profit per ton contracts.
The utility customers have arranged and guaranteed the financing of the
development and operation of these project mining subsidiaries. There is no
recourse to NACCO or North American Coal for the financing of these subsidiary
mines. North American Coal also provides dragline mining services for a limerock
quarry near Miami, Florida. At December 31, 1995 North American Coal's operating
lignite mines consisted of mines where the reserves were acquired and developed
by North American Coal, except for the South Hallsville No. 1 Mine where
reserves are owned by the customer. North American Coal also earns royalty
income from the lease of various coal and gas properties. For further
information as to the financing of the project mining subsidiaries, see Note 10
to the Consolidated Financial Statements on pages F-15 and F-16 contained in
Part IV hereof. Project mining subsidiaries accounted for 24% and 29% of NACCO's
assets and liabilities, respectively, as of December 31, 1995, while their
operations accounted for 10% and 25% of the Company's revenues and operating
profits, respectively, in 1995.
SALES AND MARKETS
The principal customers of North American Coal are electric utilities and a
synfuels plant. In 1995, sales to one customer, which supplies coal to four
facilities, accounted for 46% of North American Coal's revenues compared with
45% and 46% in 1994 and 1993, respectively. The distribution of sales in the
last five years has been as follows:
<TABLE>
<CAPTION>
DISTRIBUTION
TOTAL ----------------------
TONS SOLD ELECTRIC SYNFUELS
(MILLIONS) UTILITIES PLANT
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<S> <C> <C> <C>
1995 26.7 76% 24%
1994 27.2 76% 24%
1993 26.5 75% 25%
1992 24.5 74% 26%
1991 21.7 73% 27%
</TABLE>
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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. North American Coal does not know of any conditions of
default that currently exist.
The location, customer, sales tonnage and contract expiration date for the
mines operated by North American Coal in 1995 were as follows:
<TABLE>
<CAPTION>
1995 SALES
MINE AND CUSTOMER TONNAGE CONTRACT
MINING OPERATION LOCATION (PLANT) (MILLIONS) EXPIRES
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<S> <C> <C> <C> <C>
Project Mining Subsidiaries
The Coteau Properties Company Freedom Mine(1) Dakota Coal Company 6.4 2007(2)
Beulah, North (Great Plains Synfuels Plant)
Dakota (surface) Dakota Coal Company 5.2 2007(2)
(Antelope Valley Station)
Dakota Coal Company 2.6 2007(2)
(Leland Olds Station)
Dakota Coal Company 0.9 1997
(Stanton Station of United
Power Association)
The Falkirk Mining Company Falkirk Mine(1) United Power Association/ 7.1 2020
Underwood, North Cooperative Power Association
Dakota (surface) (Coal Creek Station)
The Sabine Mining Company South Hallsville, Southwestern Electric Power 3.7 2020
No. 1 Mine;(1) Company
Hallsville, Texas, (Henry W. Pirkey Power Plant)
(surface)
Other
Red River Mining Company Oxbow Mine; Central Louisiana Electric 0.8(3) 2010
(Joint Venture with Phillips Coushatta, Company/Southwestern Electric
Coal Company) Louisiana (surface) Power Company
(Dolet Hills Power Plant)
</TABLE>
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(1) The contracts for these mines require the customer to cover the cost of the
ongoing replacement and upkeep of the plant and equipment of the mine.
(2) 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.
(3) The amount represents the total (100%) of the 1995 joint venture tonnage.
Under terms of a lignite mining agreement entered into in 1985 with Houston
Lighting & Power Company ("HL&P") (as successor to Utility Fuels, Inc.), a
subsidiary of Houston Industries Incorporated, North American Coal was retained
to design, develop, construct and operate the proposed Trinity Mine in the
Malakoff-Cayuga reserves near Malakoff, Texas. The Trinity Mine was expected to
produce from 4.5 to 6.5 million tons of lignite annually. After several delays,
however, the proposed Malakoff Generating Station was cancelled in July 1994.
North American Coal and its wholly owned subsidiary, North American Coal Royalty
Company ("Royalty Company"), have received certain management fees, minimum
royalties and other payments in connection with the future development of the
Trinity Mine project. In December 1992 the Lignite Lease and Sublease Agreement
under which the minimum royalties were received was amended. The
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parties agreed that, in light of the delayed development of this mining project,
effective January 1, 1993 HL&P was no longer obligated to pay minimum royalties
to Royalty Company. Termination of this obligation reduced North American Coal's
annual net income approximately $2.4 million, after tax beginning in 1993. Under
the original agreement, these minimum royalty payments would have terminated at
the end of 2005.
Under the lignite mining agreement with HL&P, North American Coal had been
receiving annual management fees. HL&P accelerated payment of the final 1996
management fee of $2.6 million, after-tax, into 1995. In December 1995, HL&P
also terminated the lignite mining agreement and North American Coal will no
longer receive such management fees. Termination of this obligation will reduce
North American Coal's annual net income approximately $5.2 million, after-tax
compared with 1995 levels.
GOVERNMENT REGULATION
North American Coal, in common with other coal producers, continues to be
subject to Federal and state health, safety and environmental regulations. The
1996 expenditures which will be required for compliance with the provisions of
governmental regulations, including mined land reclamation and other air and
water pollution abatement requirements, are estimated at $1.1 million for
certain closed mines and are included in Self-Insurance Reserves and Other in
NACCO's Consolidated Financial Statements in this Annual Report on Form 10-K.
The active operations are required to make certain additional capital
expenditures to comply with such governmental regulations, which expenditures
will be recovered under the terms of the coal sales agreements with the utility
customers.
North American Coal's management believes that the Clean Air Act
Amendments, which became effective in 1990, will not have a material adverse
effect on its current operations, because substantially all of the power
generating facilities operated or supplied by North American Coal's customers
meet or exceed the requirements of the Clean Air Act.
The Federal Energy Regulatory Commission ("FERC") issued Order 636,
effective in May 1992, which requires gas pipeline companies to separate their
gas sales and gas transportation functions. As a result of this Order, the
nation's natural gas pipeline companies, including the four which purchase gas
produced by the Great Plains Synfuels Plant ("the Synfuels Plant"), which is
supplied by the company's Coteau mining subsidiary, have much less need for gas
supply under contract and are actively seeking to restructure or terminate many
supply contracts. In 1994 the four (4) pipeline companies that purchase gas from
the Synfuels Plant reached a tentative settlement agreement with the plant's
operator, Dakota Gasification Company ("DGC"), and the U.S. Department of Energy
("DOE") over the dispute regarding the pipeline companies' gas purchase
contracts. This settlement agreement resolves all pricing disputes for past
periods and establishes a new pricing formula for future gas sales. FERC
approval of the settlement agreement is required, and in 1994 each of the four
pipeline companies petitioned FERC for approval. DOE and DGC joined the pipeline
companies in asking FERC to approve the pipeline companies' settlement
agreement. In October 1994, FERC consolidated the pipeline companies' petitions
with an earlier complaint by a ratepayer group that claimed the prices charged
by one of the four pipeline companies violates FERC Opinion 119, which
authorized the purchase and pricing pass-through of gas from the Synfuels Plant.
In January 1995, FERC approved DGC's settlement with one of the four pipeline
companies. On December 29, 1995, FERC Administrative Law Judge ("ALJ") Michael
Levant issued a decision that the other three pipeline companies had acted
imprudently in entering into the settlement agreement. This decision also
established a new pricing formula that substantially reduces the price payable
by the three pipeline companies to DGC under FERC Opinion No. 119 for gas and
substantially reduces the quantity of gas that the pipelines are required to
purchase from DGC under Opinion No. 119. Furthermore, ALJ Levant's decision
requires the pipeline companies to refund to their ratepayers amounts collected
under the settlement agreement in excess of amounts allowed under his decision,
an amount estimated by DGC to be approximately $275 million. DGC subsequently
announced that the gas prices allowed under ALJ Levant's decision are less than
DGC's cost of producing gas and that the decision, if approved by FERC, could
result in closing the Synfuels Plant. On January 29, 1996, DGC, DOE and the
pipeline companies filed exceptions to ALJ Levant's decision with FERC. The
ratepayers group's response was filed February 20, 1996. FERC has committed to
taking final action in this docket by December 31, 1996.
9
<PAGE> 11
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 North
American Coal to market and develop its reserves will depend upon the
interaction of these factors. Within the coal industry, North American Coal also
competes with other large coal producers for the acquisition and development of
coal reserves and for contract mining engagements to develop and mine reserves
owned by noncoal producers.
There is no official source of information on the subject, but company
management believes that North American Coal is the eighth largest commercial
coal producer in the United States.
EMPLOYEES
As of February 29, 1996, North American Coal had approximately 950
employees.
D. KITCHEN COLLECTION
Kitchen Collection is a national specialty retailer of kitchenware, small
electric appliances and related accessories which operated 134 retail stores as
of February 29, 1996. Stores are located primarily in factory outlet complexes
that feature merchandise of highly recognizable name-brand manufacturers.
Kitchen Collection's product mix includes a broad line of appliances from
leading manufacturers, including Hamilton Beach(R) and Proctor-Silex(R)
appliances.
Kitchen Collection introduced a new store format in 1994, named
Hearthstone(TM). These stores carry a distinctive mix of merchandise for the
entire home, with particular emphasis on gift items and home decor. The product
mix and store design at Hearthstone are distinctively different from the
traditional Kitchen Collection(R) store. This market differentiation will
allow the two store formats to coexist within the same market.
Kitchen Collection accounted for 1% of NACCO's assets and liabilities as of
December 31, 1995, while its operations accounted for 3% and 2% of NACCO's
revenues and operating profits, respectively, in 1995.
ITEM 2. PROPERTIES
A. NMHG
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
NMHG.
<TABLE>
<CAPTION>
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- ---------------------------- ------ ------- -------------------------------------------
<S> <C> <C> <C>
Basingstoke, England........ X Hyster forklift truck marketing and sales
operations for Europe, the Middle East and
Africa
Berea, Kentucky............. X Manufacture of forklift trucks
Craigavon, Northern X Manufacture of forklift trucks
Ireland...................
Danville, Illinois.......... X Manufacture of forklift trucks, components
and service parts
Danville, Illinois.......... X Distribution of service parts for both
Hyster and Yale forklift trucks
Danville, Illinois.......... X Hyster forklift truck marketing and sales
operations for the Americas
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- ---------------------------- ------ ------- -------------------------------------------
<S> <C> <C> <C>
Flemington, New Jersey...... X Yale forklift truck marketing and sales
operations for the Americas and certain
NMHG engineering operations
Greenville, North X Manufacture of forklift trucks; NMHG
Carolina.................. manufacturing and other staff operations
for the Americas
Irvine, Scotland............ X Manufacture of forklift trucks and other
staff operations for Europe
Lenoir, North Carolina...... X Manufacture of component parts for forklift
trucks
Modena, Italy............... X Manufacture of forklift trucks
Nijmegen, The Netherlands... X Manufacture of forklift trucks and
component parts; distribution of service
parts for forklift trucks
Portland, Oregon............ X Technical center for testing of prototype
equipment and component parts
Portland, Oregon............ X NMHG corporate headquarters
Portland, Oregon............ X Manufacture of production tooling and
prototype units
Sao Paulo, Brazil........... X Manufacture of forklift trucks;
distribution of service parts for forklift
trucks
Sulligent, Alabama.......... X Manufacture of component parts for forklift
trucks
Sydney, Australia........... X Assembly of forklift trucks; distribution
of service parts for forklift trucks and
staff operations for Asia-Pacific
Wolverhampton, England...... X Yale forklift truck marketing and sales
operations for Europe
</TABLE>
B. HAMILTON BEACH/PROCTOR-SILEX
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
Hamilton Beach/Proctor-Silex.
<TABLE>
<CAPTION>
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- --------------------------------- ------ ------- ---------------------------------------
<S> <C> <C> <C>
Collierville, Tennessee.......... X Distribution center
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
Miami, Florida................... X Distribution center
Mt. Airy, North Carolina......... X Manufacture of heat driven products
Mt. Airy, North Carolina......... X Distribution center
Picton, Ontario, Canada.......... X Distribution center
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- --------------------------------- ------ ------- ---------------------------------------
<S> <C> <C> <C>
Southern Pines, North Carolina... X Manufacture of iron components; 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 Distribution and warranty center;
manufacture of motor driven products;
plastic molding facility
</TABLE>
Sales offices are also leased in several cities in the United States and
Canada.
C. NORTH AMERICAN COAL
North American Coal's proven and probable coal reserves and deposits (owned
in fee or held under leases which generally remain in effect until exhaustion of
the reserves if mining is in progress) are estimated at approximately 2.1
billion tons, approximately 83% of which are lignite deposits in North Dakota.
Reserves are estimates of quantities of coal, made by the company's
geological and engineering staff, that are considered mineable in the future
using existing operating methods. Developed reserves are those which have been
allocated to mines which are in operation; all other reserves are classified as
undeveloped. The table which follows gives detailed information as to North
American Coal's in-place reserves as of December 31, 1995 for the mines listed
under Item 1 "North American Coal" on page 7. The reserves of the South
Hallsville No. 1 Mine, which are listed on page 8, are owned and controlled by
the customer and, therefore, have not been listed in the following table.
Additional information concerning North American Coal is set forth in Item 1
"North American Coal".
<TABLE>
<CAPTION>
PROVEN AND PROBABLE
RESERVES (MILLIONS OF AVERAGE
TONS) SULFUR
----------------------- CONTENT
COMMITTED AVERAGE PER UNIT
UNDER BTUS OF
CONTRACT UNCOMMITTED PER LB. WEIGHT
--------- ----------- ------- --------
<S> <C> <C> <C> <C>
Developed
Freedom Mine, North Dakota.................... 536.3 -- 6,767 0.8%
Falkirk Mine, North Dakota.................... 671.5 -- 6,200 0.6%
Oxbow Mine, Louisiana(1)...................... 9.9 13.0 6,722 0.7%
--------- -----------
Total Developed............................... 1,217.7 13.0
Undeveloped
North Dakota.................................. -- 571.2 6,428 0.7%
Texas......................................... -- 205.4 6,208 0.9%
Eastern....................................... 62.5 80.1 12,070 3.3%
--------- -----------
Total Undeveloped............................. 62.5 856.7
--------- -----------
1,280.2 869.7
========== ============
</TABLE>
- ---------------
(1) These amounts represent the total (100%) of the joint venture reserves.
D. KITCHEN COLLECTION
Kitchen Collection currently owns the building housing its corporate
headquarters, a warehouse/distribution facility and a retail store in
Chillicothe, Ohio. It has entered into an Agreement for the Sale, Purchase and
Leaseback of Real Estate and Lease regarding these facilities whereby these
facilities will be sold and leased-back after certain agreed upon improvements
have been made. The company's manage-
12
<PAGE> 14
ment expects this transaction to close in April, although there can be no
assurance that this transaction will be consummated. The company leases
warehouse/distribution facilities in Chillicothe, Ohio and the remainder of its
retail stores. A typical store is approximately 3,300 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders of the Company.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The information under this Item is furnished pursuant to Instruction 3 to
Items 401(b) and 401(c) of Regulation S-K.
The table on the following pages sets forth the name, age, current position
and principal occupation and employment during the past five years of the
Company's executive officers.
13
<PAGE> 15
OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ------------------------ --- --------------------------------------------------
<S> <C> <C>
Alfred M. Rankin, Jr. 54 Chairman, President, and Chief Executive Officer
of NACCO (since May 1994)
Frank B. O'Brien 49 Senior Vice President -- Corporate Development and
Chief Financial Officer of NACCO (since January
1994)
Steven M. Billick 39 Vice President and Controller of NACCO (since July
1991)
Charles A. Bittenbender 46 Vice President, General Counsel and Secretary of
NACCO (since prior to 1991)
<CAPTION>
NAME OTHER POSITIONS
- ------------------------ --------------------------------------------------
<S> <C>
Alfred M. Rankin, Jr. From May 1991 to May 1994, President and Chief
Executive Officer of NACCO. From prior to 1991 to
May 1991, President and Chief Operating Officer of
NACCO.
Frank B. O'Brien From January 1993 to December 1993 Senior Vice
President -- Corporate Development of NACCO. From
prior to 1991 to December 1992, Vice President --
Corporate Development of NACCO.
Steven M. Billick From prior to 1991 to July 1991, Partner, Deloitte
& Touche (accounting firm).
Charles A. Bittenbender
</TABLE>
14
<PAGE> 16
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
A. NMHG
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Reginald R. Eklund 55 President and Chief Executive Officer of NMHG
(since September 1992)
G. Michael Decker 54 Vice President, Finance and Chief Financial Officer of
NMHG (since February 1993)
Julie C. Hui 39 Controller of NMHG (since January 1995)
Geoffrey D. Lewis 38 Vice President, General Counsel and Secretary of NMHG
(since September 1995)
Jeffrey C. Mattern 43 Treasurer of NMHG (since August 1992)
Frank G. Muller 54 Vice President, President Americas for NMHG
(since May 1993)
Victoria L. Rickey 43 Vice President, Managing Director, NMHG Europe
(since January 1995)
Graham D. Tribe 53 Vice President, Managing Director, NMHG Asia-Pacific
(since May 1994)
<CAPTION>
NAME OTHER POSITIONS
- ------------------------ ---------------------------------------------------------
<S> <C>
Reginald R. Eklund From August 1993 to September 1993 Vice President of
Hyster and Yale. From September 1992 to August 1993,
President and Chief Executive Officer of Hyster-Yale.
From prior to 1991 to September 1992, President and Chief
Operating Officer of NMHG. From prior to 1991 to August
1993, President and Chief Executive Officer of Yale.
G. Michael Decker From February 1993 to December 1993, Vice President,
Finance and Chief Financial Officer of Hyster and Yale.
From 1991 to February 1993, Vice President, Finance,
Secretary and Chief Financial Officer for Doehler Jarvis
Ltd. Partnership (casting manufacturer). From prior to 1991
to 1991, Senior Vice President--Finance, Treasurer and Chief
Financial Officer for The Manitowoc Company, Inc.
(manufacturer serving heavy construction, food service and
shipbuilding industries).
Julie C. Hui From 1992 to January 1995, Controller, Burr Brown
Corporation (manufacturer of micro electronics and
systems products). In 1991, Director of Accounting and
Tax of Burr Brown.
Geoffrey D. Lewis From August 1991 to September 1995 Senior Vice President,
General Counsel and Corporate Secretary for American
Health Properties, Inc. (health care facilities). From
prior to 1991 to August 1991 attorney for Jones, Day,
Reavis & Pogue (law firm).
Jeffrey C. Mattern From August 1992, Treasurer of Hyster and Yale. From
prior to 1991 to July 1992, Assistant Treasurer for
Harnischfeger Industries, Inc. (manufacturer of
papermaking machinery, mining and materials handling
equipment).
Frank G. Muller From February 1993 to December 1993, Vice President of
Hyster and Yale. From May 1992 to May 1993, Vice
President, Manufacturing, Americas for NMHG. From prior
to 1991 to May 1992, Vice President, Manufacturing, Yale.
Victoria L. Rickey From 1993 to January 1995, Senior Vice President
International Business Group, J.I. Case (manufacturer of
agricultural and construction equipment). From prior to
1991 to 1993, Vice President, Agricultural Equipment of
J.I. Case.
Graham D. Tribe From prior to 1991 to May 1994, Managing Director, Hyster
Australia Pty. Ltd.
</TABLE>
15
<PAGE> 17
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES -- CONTINUED
B. HAMILTON BEACH/PROCTOR-SILEX
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ------------------------ --- --------------------------------------------------
<S> <C> <C>
Richard E. Posey 48 President and Chief Executive Officer of Hamilton
Beach/Proctor-Silex (since September 1995)
Judith B. McBee 48 Executive Vice President -- Marketing of Hamilton
Beach/Proctor-Silex (since October 1994)
Paul C. Smith 49 Senior Vice President -- Sales and International
of Hamilton Beach/Proctor-Silex (since January
1996)
Clark S. Leslie 62 Vice President -- Operations of Hamilton
Beach/Proctor-Silex (since March 1996)
Charles B. Hoyt 48 Vice President -- Finance and Chief Financial
Officer of Hamilton Beach/Proctor-Silex (since
prior to 1991)
Ronald C. Eksten 52 Vice President, General Counsel and Secretary of
Hamilton Beach/Proctor-Silex (since December 1991)
Michael J. Morecroft 53 Vice President, Engineering/Product Development of
Hamilton Beach/ Proctor-Silex (since prior to
1991)
James H. Taylor 38 Vice President and Treasurer of Hamilton
Beach/Proctor-Silex (since prior to 1991)
<CAPTION>
NAME OTHER POSITIONS
- ------------------------ --------------------------------------------------
<S> <C>
Richard E. Posey From January 1993 to June 1994, Executive Vice
President, Consumer Products, North America, S.C.
Johnson & Sons, Inc. From prior to 1991 to
December 1992, Executive Vice President, Regional
Director, Consumer Products, S.C. Johnson & Sons,
Inc. (manufacturer of consumer products).
Judith B. McBee From prior to 1991 to September 1994, Executive
Vice President -- Marketing/Sales of Hamilton
Beach/Proctor-Silex.
Paul C. Smith From September 1994 to January 1996, Senior Vice
From prior to 1991 to September 1994, Vice
President and General Manager, Consumer Markets
Division, Fuji Photo Film U.S.A. (manufacturer of
photographic film).
Clark S. Leslie From December 1993 to March 1996, General Manager,
Washington N.C. plant, Hamilton
Beach/Proctor-Silex. From prior to 1991 to
December 1993, Senior Vice President of
Operations, Esselt Pendaflex Corp. (manufacturer
of office supplies).
Charles B. Hoyt
Ronald C. Eksten From prior to 1991 to December 1991, Associate
General Counsel, Continental Can Company, Inc. (an
international manufacturer of packaging products).
Michael J. Morecroft
James H. Taylor
</TABLE>
16
<PAGE> 18
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES -- CONTINUED
C. NORTH AMERICAN COAL
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ------------------------ --- --------------------------------------------------
<S> <C> <C>
Clifford R. Miercort 56 President and Chief Executive Officer of North
American Coal (since prior to 1991)
H. Dean Jacot 53 Executive Vice President and Chief Operating
Officer of North American Coal (since prior to
1991)
Herschell A. Cashion 53 Senior Vice President -- Business Development of
North American Coal (since August 1994)
Charles B. Friley 54 Vice President and Chief Financial Officer of
North American Coal (since February 1995)
Thomas A. Koza 49 Vice President -- Law and Administration of North
American Coal; Secretary of North American Coal
(since prior to 1991)
K. Donald Grischow 48 Controller and Treasurer of North American Coal
(since prior to 1991)
<CAPTION>
NAME OTHER POSITIONS
- ------------------------ --------------------------------------------------
<S> <C>
Clifford R. Miercort
H. Dean Jacot
Herschell A. Cashion From prior to 1991 to August 1994, Vice President
-- Business Development of North American Coal.
Charles B. Friley From April 1992 to October 1994, Senior Vice
President of Phillips Alaska Natural Gas Company.
From prior to 1991 to April 1992, Vice President
of Phillips 66 Natural Gas Company.
Thomas A. Koza
K. Donald Grischow
</TABLE>
17
<PAGE> 19
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES -- CONTINUED
D. KITCHEN COLLECTION
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- ------------------------ --- --------------------------------------------------
<S> <C> <C>
Randall D. Lynch 48 President and Chief Executive Officer of Kitchen
Collection (since June 1991)
Randolph J. Gawelek 48 Executive Vice President and Secretary of Kitchen
Collection (since prior to 1991)
<CAPTION>
NAME OTHER POSITIONS
- ------------------------ --------------------------------------------------
<S> <C>
Randall D. Lynch From prior to 1991 to June 1991, President of
Kitchen Collection.
Randolph J. Gawelek
</TABLE>
18
<PAGE> 20
PART II
ITEM 5. 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 stock for the past two
years are presented in the table below:
<TABLE>
<CAPTION>
1995
------------------------------
SALES PRICE
------------------- CASH
HIGH LOW DIVIDEND
------ ------ --------
<S> <C> <C> <C> <C>
First quarter........................................ $56.75 -- $46.88 17.0C.
Second quarter....................................... $64.00 -- $53.63 18.0C.
Third quarter........................................ $63.50 -- $56.00 18.0C.
Fourth quarter....................................... $60.50 -- $55.25 18.0C.
</TABLE>
<TABLE>
<CAPTION>
1994
------------------------------
SALES PRICE
------------------- CASH
HIGH LOW DIVIDEND
------ ------ --------
<S> <C> <C> <C> <C>
First quarter........................................ $58.13 -- $48.38 16.5c.
Second quarter....................................... $60.75 -- $45.75 17.0c.
Third quarter........................................ $63.00 -- $52.88 17.0c.
Fourth quarter....................................... $64.00 -- $46.63 17.0c.
</TABLE>
At December 31, 1995, there were approximately 800 Class A common
stockholders of record and 500 Class B common stockholders of record.
19
<PAGE> 21
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AND EMPLOYEE DATA)
<S> <C> <C> <C> <C> <C>
Total revenues................................. $2,204.5 $1,864.9 $1,549.4 $1,483.8 $1,369.2
Operating profit............................... $ 151.1 $ 130.8 $ 89.0 $ 101.3 $ 94.5
Income before extraordinary items.............. $ 65.5 $ 45.3 $ 11.6 $ 22.9 $ 20.0
Extraordinary items:
Extraordinary gain, net-of-tax............... 32.3
Extraordinary charges, net-of-tax............ (3.4) (3.2) (3.3) (110.0)
-------- -------- -------- -------- --------
Net income (loss).............................. $ 94.4 $ 42.1 $ 8.3 $ (87.1) $ 20.0
======= ======= ======= ======= =======
Total assets................................... $1,833.8 $1,694.3 $1,642.5 $1,684.9 $1,629.7
Notes payable.................................. $ 320.2 $ 286.7 $ 357.8 $ 459.9 $ 442.3
Stockholders' equity........................... $ 370.1 $ 279.4 $ 235.6 $ 238.3 $ 350.2
Per share of stock:
Income before extraordinary items............ $ 7.31 $ 5.06 $ 1.30 $ 2.57 $ 2.26
Extraordinary items:
Extraordinary gain, net-of-tax............ 3.61
Extraordinary charges, net-of-tax......... (.38) (.36) (.37) (12.37)
-------- -------- -------- -------- --------
Net income (loss)............................ $ 10.54 $ 4.70 $ .93 $ (9.80) $ 2.26
======= ======= ======= ======= =======
Cash dividends............................... $ .710 $ .675 $ .655 $ .635 $ .615
Market value at December 31.................. $ 55.50 $ 48.38 $ 51.50 $ 51.75 $ 47.50
Stockholders' equity......................... $ 41.28 $ 31.21 $ 26.35 $ 26.67 $ 39.43
Average shares outstanding..................... 8.963 8.948 8.938 8.891 8.878
Total employees................................ 12,300 11,100 10,900 10,500 9,900
</TABLE>
20
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
FINANCIAL SUMMARY
Income before extraordinary items for 1995 was $65.5 million, or $7.31 per
share, compared with income before extraordinary items of $45.3 million, or
$5.06 per share, in 1994 and $11.6 million, or $1.30 per share, in 1993. In
1995, an extraordinary gain of $32.3 million, net-of-tax, or $3.61 per share was
recognized as a result of an adjustment to the obligation to the United Mine
Workers of America Combined Benefit Fund. Extraordinary charges of $3.4 million,
$3.2 million and $3.3 million, net-of-tax, or $0.38 per share, $0.36 per share
and $0.37 per share, respectively, were recognized in 1995, 1994 and 1993. The
extraordinary charges relate to the new credit agreement at NMHG and the
retirements of NACCO Materials Handling Group's Hyster-Yale 12 3/8% subordinated
debentures. These extraordinary items are discussed in more detail in Note 3 to
the consolidated financial statements on page F-10 and in this discussion and
analysis on pages 29 and 35. Net income was $94.4 million, or $10.54 per share,
in 1995, $42.1 million, or $4.70 per share, in 1994 and $8.3 million, or $0.93
per share, in 1993.
The following schedule details the components of the changes in
consolidated revenues, operating profit and net income for 1995 compared with
1994:
<TABLE>
<CAPTION>
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
<S> <C> <C> <C>
1994..................................................... $1,864.9 $ 130.8 $42.1
Increase (decrease) in 1995 from:
NMHG................................................ 331.2 20.0 14.6
HB/PS............................................... 5.0 (.3) (.3 )
NACoal.............................................. (2.2 ) 1.5 1.9
KCI................................................. 5.7 (2.1) (1.5 )
NACCO & Other....................................... (.1 ) 1.2 1.7
Difference between effective and statutory tax
rates............................................. 4.6
Minority interest................................... (.9 )
Extraordinary items................................. 32.2
-------- --------- ------
1995..................................................... $2,204.5 $ 151.1 $94.4
======== ========= =======
</TABLE>
SEGMENT INFORMATION
NACCO Industries, Inc. ("NACCO," the parent company) has four operating
subsidiaries: The North American Coal Corporation ("North American Coal" or
"NACoal"), NACCO Materials Handling Group, Inc. ("NACCO Materials Handling
Group" or "NMHG"), Hamilton Beach/Proctor-Silex, Inc. ("Hamilton
Beach/Proctor-Silex" or "HB/PS") and The Kitchen Collection, Inc. ("Kitchen
Collection" or "KCI"). These four subsidiaries function in distinct business
environments, and the results of operations and financial condition are best
discussed at the subsidiary level. Results by segment as reported in the
financial statements are summarized in Note 19 to the consolidated financial
statements on page F-22 of this annual report.
NORTH AMERICAN COAL
North American Coal mines and markets lignite for use primarily as fuel for
power generation by electric utilities. The lignite is surface-mined in North
Dakota, Texas and Louisiana. Total coal reserves approximate 2.1 billion tons,
with 1.3 billion tons committed to electric utility customers pursuant to
long-term contracts.
In November 1995, North American Coal began providing dragline mining
services ("non-coal mining operations") for a limerock quarry near Miami,
Florida. The operating results for the non-coal mining operations are included
in other mining operations.
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
FINANCIAL REVIEW
North American Coal's three project mining subsidiaries (Coteau, Falkirk
and Sabine) mine lignite for utility customers pursuant to long-term contracts
at a price based on actual cost plus an agreed pretax profit per ton. Due to the
cost-plus nature of these contracts, revenues and operating profits are impacted
by increases and decreases in operating costs, as well as by sales tons. 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 mines,
operating results are best analyzed in terms of income before taxes and net
income.
Tons sold by North American Coal's four operating lignite mines remains
steady and were as follows for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Coteau Properties......................................... 15.1 15.7 14.9
Falkirk Mining............................................ 7.1 7.3 7.6
Sabine Mining............................................. 3.7 3.4 3.5
Red River Mining.......................................... .8 .8 .5
---- ---- ----
26.7 27.2 26.5
==== ==== ====
</TABLE>
Revenues, income before taxes, provision for taxes and net income were as
follows for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Revenues
Project mines.................................... $221.0 $226.6 $216.4
Other mining operations.......................... 14.7 13.9 10.0
------ ------ ------
235.7 240.5 226.4
Royalties and other................................... 12.3 9.7 6.9
------ ------ ------
$248.0 $250.2 $233.3
====== ====== ======
Income before taxes
Project mines.................................... $ 24.5 $ 23.6 $ 24.2
Other mining operations.......................... 1.0 2.3 1.1
------ ------ ------
Total from operating mines............................ 25.5 25.9 25.3
Royalty and other income, net......................... 14.0 10.5 7.7
Headquarters expense.................................. (6.1) (6.0) (5.2)
------ ------ ------
33.4 30.4 27.8
Provision for taxes................................... 10.8 9.4 10.4
------ ------ ------
Net income....................................... $ 22.6 $ 21.0 $ 17.4
====== ====== ======
</TABLE>
Low-cost production has led to customer demand in excess of the original
19.4 million tons of volume specified in the original contracts. Actual
production as a percentage of this original contract volume has been: 1991 --
113 percent; 1992 -- 124 percent; 1993 -- 135 percent; 1994 -- 140 percent; 1995
- -- 138 percent.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues,
income before taxes and net income for 1995 compared with 1994:
<TABLE>
<CAPTION>
INCOME NET
REVENUES BEFORE TAXES INCOME
-------- ------------ ------
<S> <C> <C> <C>
1994.................................................. $250.2 $ 30.4 $21.0
Increase (decrease) in 1995 from:
Project mines
Tonnage volume.............................. (2.3) (.4) (.3 )
Mix of tons sold............................ .3 .3 .2
Agreed profit per ton....................... 1.0 1.0 .6
Pass-through costs.......................... (4.6) -- --
Other mining operations
Tonnage volume.............................. 1.8 .9 .6
Mix of tons sold............................ 4.8 4.8 3.1
Average selling price....................... (5.8) (5.8) (3.7 )
Operating costs............................. -- (1.7) (1.1 )
Other income (expense)...................... -- .5 .3
-------- ------ ------
Changes from operating mines........................ (4.8) (.4) (.3 )
Royalties and other income, net..................... 2.6 3.5 2.3
Headquarters expense................................ -- (.1) (.1 )
Difference between effective and statutory tax
rates............................................ -- -- (.3 )
-------- ------ ------
1995.................................................. $248.0 $ 33.4 $22.6
======== =========== =======
</TABLE>
The level of customer fuel requirements produced lower demand at Coteau and
Falkirk and higher demand at Sabine, resulting in a slight reduction overall in
volume at the project mines in 1995. The favorable agreed profit per ton
variance at the project mines was the result of the annual escalation in the
agreed profit per ton as provided for in the long-term contracts with each
mine's customer.
At the other mining operations, the favorable impact from tonnage volume
was primarily caused by increased demand at Red River due to the higher fuel
requirements of its customer. Increased sales of base tons at Red River, which
yield a higher price as specified in the supply contract, resulted in a
favorable mix variance at the other mining operations. In addition, Red River
signed a new agreement with its customer in 1995 that extends the contract term
to 2010 in exchange for lower per-ton sales prices, which resulted in the
unfavorable price variance at the other mining operations.
The increase in royalty and other income relates to the accelerated receipt
of annual management fees under a contract mining agreement between North
American Coal and a public utility company. The utility company accelerated the
final annual management fee payment of $2.6 million, after-tax, from 1996 into
1995.
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1994 COMPARED WITH 1993
The following schedule details the components of the changes in revenues,
income before taxes and net income for 1994 compared with 1993:
<TABLE>
<CAPTION>
INCOME NET
REVENUES BEFORE TAXES INCOME
-------- ------------ ------
<S> <C> <C> <C>
1993.................................................. $233.3 $ 27.8 $17.4
Increase (decrease) in 1994 from:
Project mines
Tonnage volume.............................. 1.1 .1 --
Mix of tons sold............................ (.5) (.5) (.3 )
Agreed profit per ton....................... (.5) (.5) (.4 )
Pass-through costs.......................... 9.9 -- --
Other mining operations
Tonnage volume.............................. 6.6 1.6 1.0
Mix of tons sold............................ (1.6) (1.6) (1.0 )
Average selling price....................... (1.1) (1.1) (.7 )
Operating costs............................. -- 3.4 2.2
Other income (expense)...................... -- (1.2) (.8 )
-------- ------ ------
Changes from operating mines........................ 13.9 .2 --
Royalties and other income, net..................... 3.0 3.2 2.1
Headquarters expense................................ -- (.8) (.5 )
Difference between effective and statutory tax
rates............................................ -- -- 2.0
-------- ------ ------
1994.................................................. $250.2 $ 30.4 $21.0
======== =========== =======
</TABLE>
Higher customer fuel requirements at Coteau, although slightly offset by
reduced volume at Falkirk, resulted in increased tonnage volume at the project
mines in 1994 compared with 1993. At the other mining operations, tonnage volume
increased due to higher customer fuel requirements at Red River. In addition,
tons sold at Red River in excess of amounts specified in the contract yield a
lower price, resulting in an unfavorable sales mix in 1994 at the other mining
operations.
The increased tonnage at Red River resulted in volume efficiencies that
favorably impacted operating costs. The increase in royalties and other income
in 1994 is from royalties received relating to former coal properties from which
royalties were not received in 1993.
24
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Interest income
Project mines....................................... $ 1.1 $ .8 $ .5
Other mining operations............................. 1.3 2.2 1.6
------ ------ ------
$ 2.4 $ 3.0 $ 2.1
====== ====== ======
Interest expense
Project mines....................................... $(14.0) $(14.3) $(14.1)
Other mining operations............................. (1.3) (1.3) (.8)
------ ------ ------
$(15.3) $(15.6) $(14.9)
====== ====== ======
Other-net
Project mines....................................... $ .2 $ .4 $ .2
Other mining operations............................. .3 (1.5) (.2)
------ ------ ------
$ .5 $ (1.1) $ --
====== ====== ======
Effective tax rate.................................... 32.4% 31.1% 37.9%
</TABLE>
In the third quarter of 1993, North American Coal recognized additional tax
expense to reflect the impact on its deferred tax balances of the one percent
increase in the federal statutory tax rate. This adjustment increased North
American Coal's effective tax rate in 1993 relative to 1995 and 1994.
1996 OUTLOOK
North American Coal's lignite mines are expected to produce about the same
number of total tons in 1996 as in 1995, as customer requirements appear level
with the previous year. The non-coal mining operations are expected to mine
approximately 9.0 million tons of limerock, although the impact on net income
will not be material. In 1995, Falkirk, Red River and Sabine entered into
contract extensions with their customers until 2020, 2010 and 2020,
respectively. In 1994, Coteau extended its contract with its customer for up to
an additional 30 years, through 2037. North American Coal received these
extensions in exchange for reduced levels of profit.
North American Coal has been receiving annual management fees under the
previously discussed contract mining agreement it has with a public utility
company. The utility company terminated the contract mining agreement in 1995,
and North American Coal will no longer receive such management fees. In
addition, North American Coal anticipates a reduction in 1996 of approximately
$1.3 million in royalties received relating to former coal properties. This
reduction is expected to be temporary.
LIQUIDITY AND CAPITAL RESOURCES
North American Coal has in place a $50.0 million revolving credit facility.
The expiration date of this facility (which currently is September 2000) may be
extended, on an annual basis, for one additional year upon the mutual consent of
North American Coal and the bank group. North American Coal had all of its $50.0
million revolving credit facility available at December 31, 1995.
The financing of the project mining subsidiaries, which is guaranteed by
the utility customers, comprises long-term equipment leases, notes payable and
non-interest-bearing advances from customers. The obligations of the project
mining subsidiaries do not impact the short- or long-term liquidity of the
company and are without recourse to NACCO or North American Coal. These
arrangements allow the project mining subsidiaries to pay dividends in amounts
equal to their retained earnings.
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Expenditures for property, plant and equipment by the project mining
subsidiaries were $19.0 million in 1995 and $11.7 million in 1994, and are
anticipated to be approximately $16.6 million in 1996. These expenditures relate
to the development and improvement of the project mining subsidiaries' mines and
are financed or guaranteed by the utility customers.
NACCO MATERIALS HANDLING GROUP
NACCO Materials Handling Group, 97 percent-owned by NACCO, designs,
manufactures and markets forklift trucks and related service parts under the
Hyster(R) and Yale(R) brand names.
FINANCIAL REVIEW
The results of operations for NMHG were as follows for the year ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ------
<S> <C> <C> <C>
Revenues
Americas.............................................. $1,002.7 $ 828.1 $645.4
Europe, Africa and Middle East........................ 422.3 289.7 220.5
Asia-Pacific.......................................... 85.1 61.1 42.3
-------- -------- ------
$1,510.1 $1,178.9 $908.2
======= ======= ======
Operating profit
Americas.............................................. $ 51.1 $ 45.5 $ 40.3
Europe, Africa and Middle East........................ 34.4 15.1 (2.4)
Asia-Pacific.......................................... .3 5.2 1.7
-------- -------- ------
$ 85.8 $ 65.8 $ 39.6
======= ======= ======
Operating profit excluding goodwill amortization
Americas.............................................. $ 58.9 $ 53.4 $ 48.2
Europe, Africa and Middle East........................ 37.2 17.9 .4
Asia-Pacific.......................................... .5 5.3 1.8
-------- -------- ------
$ 96.6 $ 76.6 $ 50.4
======= ======= ======
Net income (loss) before extraordinary charges............. $ 36.9 $ 18.7 $ (5.1)
Extraordinary charges, net-of-tax..................... (3.4) (3.2) (3.3)
-------- -------- ------
Net income (loss)..................................... $ 33.5 $ 15.5 $ (8.4)
======= ======= ======
</TABLE>
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
<TABLE>
<CAPTION>
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
<S> <C> <C> <C>
1994.................................................... $1,178.9 $ 65.8 $15.5
Increase (decrease) in 1995 from:
Unit volume........................................ 235.0 43.0 28.0
Sales mix.......................................... (7.1) (12.1) (7.9)
Average sales price................................ 57.6 57.6 37.4
Service parts...................................... 16.0 7.4 4.8
Foreign currency................................... 26.6 (7.7) (5.0)
DECA S.r.1......................................... 3.1 .3 .2
Manufacturing cost................................. -- (46.1) (29.1)
Other operating expense............................ -- (22.4) (14.6)
Other income and expense........................... -- -- .8
Difference between effective and statutory tax
rates............................................ -- -- 3.6
Extraordinary charges.............................. -- -- (.2)
-------- --------- -------
1995.................................................... $1,510.1 $ 85.8 $33.5
======== ========= =======
</TABLE>
Unit volumes during 1995 increased 20 percent to 49,953 units in the
Americas, 37 percent to 16,701 units in Europe and 54 percent to 2,859 units in
Asia-Pacific when compared with 1994. The increased volumes resulted from growth
in both market size and market share. The price increases announced in mid-1994
favorably impacted pricing during all of 1995, while the price increases
announced in the spring of 1995 reached their full impact in the fourth quarter.
These price increases were enacted to offset the raw material cost increases and
currency impacts discussed below. The unfavorable sales mix resulted from a
shift to certain lower margin markets in Europe and lower margin products in
both the Americas and Europe. The strong markets in both the Americas and
Europe, along with price increases in the Americas, resulted in improved results
from sales of service parts.
The favorable impact from currency on revenues was due to the strength of
European currencies relative to the dollar. This favorable impact was offset by
the strength of the yen relative to the dollar, resulting in an unfavorable
impact on operating profit, particularly in the first nine months of 1995. The
strong yen increased the cost of purchases sourced from Japan. During 1995, NMHG
acquired DECA S.r.1., a manufacturer of European warehouse equipment located in
Italy. DECA's contribution to 1995 operating results is shown separately in the
above table.
Increased raw materials prices and manufacturing inefficiencies caused by
vendor parts shortages, the training of new employees and capacity constraints
resulted in higher manufacturing costs in 1995. Increases in new product
introduction and marketing programs, administrative costs and service parts
distribution costs resulted in higher other operating expenses.
27
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1994 COMPARED WITH 1993
The following schedule details the components of the changes in revenues,
operating profit and net income (loss) for 1994 compared with 1993:
<TABLE>
<CAPTION>
NET
OPERATING INCOME
REVENUES PROFIT (LOSS)
-------- --------- ------
<S> <C> <C> <C>
1993.................................................... $ 908.2 $ 39.6 $(8.4 )
Increase (decrease) in 1994 from:
Unit volume........................................ 211.7 40.8 26.5
Sales mix.......................................... 8.1 (.8) (.5 )
Average sales price................................ 14.7 14.7 9.6
Service parts...................................... 27.2 11.1 7.2
Foreign currency................................... 9.0 (4.2) (2.7 )
Manufacturing cost................................. -- 3.5 2.3
Other operating expense............................ -- (38.9) (25.2 )
Other income and expense........................... -- -- 7.1
Difference between effective and statutory tax
rates............................................ -- -- (.5 )
Extraordinary charge............................... -- -- .1
-------- --------- ------
1994.................................................... $1,178.9 $ 65.8 $15.5
======== ========= =======
</TABLE>
Record market size in North America and higher market shares in both the
Americas and Europe resulted in record lift truck unit volume of approximately
56,000 units at NMHG in 1994. Unit shipments were up approximately 25 percent
and 30 percent in the Americas and in Europe, respectively. NMHG initiated
modest price increases during the middle of 1994 which were accepted in the
marketplace, favorably affecting operating results. The strong economy in North
America and new marketing programs and new dealers in Europe improved the
worldwide service parts business. During 1994, a weaker U.S. dollar caused
translated revenues to be higher compared with 1993, while operating profit was
adversely affected by the strong Japanese yen, which increased the cost of
purchases sourced from Japan.
The improvement in manufacturing cost is due to the favorable effect of
increased manufacturing throughput partially offset by plant ramp-ups and vendor
parts shortages which caused labor inefficiencies. Other operating expense
increased in 1994 compared with 1993 due to higher costs associated with
strategic marketing and product development programs, increased incentive-based
payroll costs and additional warranty expenditures related to new products and
increased volumes.
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Interest income....................................... $ .9 $ .8 $ .8
Interest expense...................................... (30.6) (33.7) (40.4)
Other-net............................................. 2.2 2.9 (1.7)
------ ------ ------
$(27.5) $(30.0) $(41.3)
====== ====== ======
Effective tax rate.................................... 36.8% 47.7% NM
</TABLE>
The debt restructurings carried out in 1993 through 1995 and equity
infusions of 1994 and 1993 reduced the level of high cost debt, resulting in
lower overall effective interest rates that reduced interest expense in 1995
compared with 1994 and 1993.
Other-net consists primarily of equity in the earnings of the
Sumitomo-NACCO ("S-N"), a 50 percent-owned joint venture, gains and losses on
the sale of assets and grant income. In 1995, other-net included income of $2.2
million from S-N, compared with income of $0.5 million in 1994 and a loss of
$3.9 million in 1993. The improved results at S-N in 1995 and 1994 were due to
increasing sales volumes to NMHG and continuing manufacturing cost reductions.
In 1994, other-net also included $3.2 million of employment grant income related
to additional hiring at the Craigavon, Northern Ireland, facility. The
significant loss at S-N in
28
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1993 was caused by the upward pressures on S-N's costs due to a much stronger
yen, as well as the depressed European and Japanese markets. During the second
quarter of 1993, NMHG sold its former manufacturing site in Wednesfield,
England, for $3.3 million, resulting in a net pretax gain of $2.1 million.
For 1993, the effective tax rate was not meaningful because expenses not
deductible for tax purposes, primarily amortization of goodwill, resulted in a
tax provision in 1993 despite a loss before income taxes. The higher levels of
pretax income in 1995 and 1994 reduced the effect of these non-deductible
expenses and resulted in lower effective tax rates that were nearer to the
statutory tax rate. Also in 1995, NMHG reached agreement with various tax
authorities resulting in non-recurring tax benefits which lowered the effective
tax rate.
EXTRAORDINARY CHARGES
The extraordinary charges recognized in 1995, 1994 and 1993 primarily
relate to the early retirement of the Hyster-Yale 12 3/8% debentures. The 1995
extraordinary charge includes a $1.3 million charge, net-of-tax, recognized in
the first quarter, when NMHG's former revolving credit facility and senior term
loan were replaced by the new long-term credit agreement. In the third quarter
of 1995 a charge of $2.1 million, net-of-tax, was recognized. This charge, as
well as the 1994 and 1993 charges, represent call premiums and the write-off of
the remaining unamortized debt issuance costs associated with the retirement of
$78.5 million, $70.0 million and $50.0 million face-value, respectively, of the
12 3/8% debentures. These retirements were achieved using bank borrowings,
internally generated funds of NMHG and equity infusions from existing
stockholders.
BACKLOG
NMHG's backlog of orders at December 31, 1995, was approximately 21,200
forklift truck units, compared with 24,600 units and 12,100 units at December
31, 1994 and 1993, respectively. The continuation of strong orders and vendor
parts shortages in 1995 caused backlog levels to remain high. Management
believes that the NMHG backlog levels are consistent with the overall industry.
1996 OUTLOOK
The forklift truck industry has historically been cyclical, with industry
demand fluctuating with the economic conditions in the various geographic
markets in which the industry's customers operate. Based on external economic
forecasts and recent factory order levels, management expects demand in North
America to level-off in 1996 from its 1995 peak. In Europe, the strong growth
experienced in certain markets during 1995 may slow somewhat in 1996, but
overall the European market should expand. Many of the markets in Asia-Pacific
should continue to grow in 1996. The Japanese market is expected to grow
modestly in 1996. Overall, with the forecasted market levels and its backlog,
NMHG anticipates increased shipments in 1996 compared with 1995.
In 1996, NMHG will continue to strive for increased market share,
particularly in Asia-Pacific and the European warehouse equipment markets. The
significant investments in manufacturing capacity that were made in 1995 and
those planned for 1996 should help alleviate the manufacturing inefficiencies
experienced in 1995 by reducing delivery lead times and improving efficiency. In
addition, NMHG will continue to introduce new products in 1996, and by mid-year
approximately 80 percent of its product will have been redesigned since the
merger of Hyster and Yale in 1989.
LIQUIDITY AND CAPITAL RESOURCES
NMHG had available $75.0 million of its $350.0 million revolving credit
facility ("Facility") at December 31, 1995. The company entered into this
Facility on February 28, 1995, to replace its existing bank agreement and to
refinance the majority of its existing long-term debt. This Facility has a five
year maturity with extension options and performance-based pricing which
provides the company with reduced interest rates
29
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
upon achievement of certain financial performance targets. This Facility allowed
the company to redeem the remaining $78.5 million outstanding Hyster-Yale
12 3/8% debentures. NMHG has separate facilities totalling $30.5 million, of
which $26.5 million was available at December 31, 1995. The company believes it
can meet its current and long-term commitments and operating needs from
operating cash flow and funds available under credit agreements.
Expenditures for property, plant and equipment were $39.4 million in 1995
and $25.9 million in 1994, and are anticipated to be approximately $50.0 million
in 1996. These expenditures relate to investments in productive capacity because
of the increased unit volumes, as well as to new product development. NMHG is
investing to improve production volumes at all of its plants and has undertaken
expansion of its Craigavon, Northern Ireland, and Irvine, Scotland, production
facilities. Capital for these expenditures has been and is expected to be
provided primarily by internally generated funds and, to a lesser degree,
government assistance grants.
NMHG'S capital expenditures in 1995, 1994 and 1993 of $39.4 million, $25.9
million and $20.2 million, respectively, are outpacing depreciation expense of
$20.2 million in 1995, $19.9 million in 1994 and $18.8 million in 1993.
Increased working capital requirements in 1995 impeded NMHG's progress
toward its target capital structure of 35 percent debt-to-total capitalization.
At December 31, 1995, NMHG's debt-to-total capitalization was 49 percent
compared with 46 percent and 56 percent at December 31, 1994 and 1993,
respectively.
HAMILTON BEACH/PROCTOR-SILEX
Hamilton Beach/Proctor-Silex, 80 percent-owned by NACCO, is a leading
manufacturer of small electric appliances. The housewares business is seasonal.
A majority of revenues and operating profit occurs in the second half of the
year, when sales of small electric appliances increase significantly for the
fall holiday selling season.
FINANCIAL REVIEW
The results of operations for Hamilton Beach/Proctor-Silex were as follows
for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Revenues.............................................. $381.4 $377.5 $356.3
Operating profit...................................... $ 25.0 $ 25.3 $ 11.8
Operating profit excluding goodwill amortization...... $ 27.8 $ 28.1 $ 14.7
Net income (loss)..................................... $ 11.8 $ 10.2 $ (1.0)
</TABLE>
30
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
<TABLE>
<CAPTION>
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
<S> <C> <C> <C>
1994.............................................. $377.5 $25.3 $10.2
Increase (decrease) in 1995 from:
Unit volume and sales mix.................... 6.4 5.1 3.3
Average sales price.......................... (2.5) (2.5) (1.6 )
Manufacturing cost........................... -- (.2) (.1 )
Other operating expense...................... -- (2.7) (1.8 )
Other income and expense..................... -- -- (.1 )
Difference between effective and statutory
tax rates.................................. -- -- 1.9
-------- --------- ------
1995.............................................. $381.4 $25.0 $11.8
======== ========= =======
</TABLE>
During 1995, the size of the domestic small electric appliance market
declined approximately 4 percent. Nevertheless, HB/PS increased its market share
from 27.8 percent in 1994 to 29.9 percent in 1995. Increased sales of can
openers, irons, roaster ovens and coffeemakers, slightly offset by reduced sales
of toasters, toaster ovens and blenders, resulted in overall higher volume. In
1995, approximately 46 percent of HB/PS's total sales volume was in the "better"
and "best" product categories, compared with 43 percent in 1994. This favorable
shift in sales mix resulted in improved margins on the incremental volumes in
1995. Reduced pricing on domestic products in the "better" and "best" categories
was the primary cause of the unfavorable price variance. Increased selling and
marketing costs as well as administrative costs caused the unfavorable impact
from other operating expenses.
1994 COMPARED WITH 1993
The following schedule details the components of the changes in revenues,
operating profit and net income (loss) for 1994 compared with 1993:
<TABLE>
<CAPTION>
NET
OPERATING INCOME
REVENUES PROFIT (LOSS)
-------- --------- ------
<S> <C> <C> <C>
1993.............................................. $356.3 $11.8 $(1.0 )
Increase (decrease) in 1994 from:
Unit volume and sales mix....................... 19.0 4.7 3.1
Average sales price............................. 4.2 4.2 2.8
Foreign currency translation.................... (2.0) (2.0) (1.3 )
Manufacturing cost.............................. -- 8.5 5.6
Other operating expense......................... -- (1.9) (1.3 )
Other income and expense........................ -- -- 2.7
Difference between effective and statutory tax
rates........................................ -- -- (.4 )
-------- --------- ------
1994.............................................. $377.5 $25.3 $10.2
======== ========= =======
</TABLE>
During 1994, Hamilton Beach/Proctor-Silex experienced increased volumes in
blenders, mixers, coffeemakers and food processors sold domestically and in most
products sold in Canada. The increased volumes in these product lines were
tempered somewhat by decreased steam grill and toaster sales domestically and
lower toaster oven sales both domestically and in Canada. Contributing to a
positive sales mix were increased sales of high-end toasters, irons and toaster
ovens offset by a shift to lower-priced blender models. Hamilton
31
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Beach/Proctor-Silex's improvements in pricing occurred in both the domestic and
Canadian markets across most core heat and motor-driven product lines.
The successful completion of its manufacturing consolidation programs,
level loading of its factories and reduced transportation costs favorably
affected operating results at Hamilton Beach/Proctor-Silex by reducing
manufacturing costs. Level loading maintains consistent production and staffing
levels throughout the year, contributing favorably to manufacturing efficiencies
by maintaining a more highly trained and experienced work force. Other operating
expenses were unfavorable in 1994 compared with 1993, primarily due to higher
selling and incentive compensation costs.
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ------
<S> <C> <C> <C>
Interest expense........................................ $(7.2) $(7.5) $ (7.7)
Other-net............................................... (.8) (.3) (4.1)
----- ----- ------
$(8.0) $(7.8) $(11.8)
===== ===== ======
Effective tax rate...................................... 31.0% 41.7% NM
</TABLE>
Interest expense decreased in 1995 compared with 1994 due to lower average
borrowings partially offset by higher average interest rates. The reduced
interest expense in 1994 compared with 1993 is due to lower average interest
rates partially offset by higher average borrowings.
The decrease in other-net in 1994 compared with 1993 resulted primarily
from the settlement of certain litigation during 1993.
The reduction in HB/PS's tax rate in 1995 compared with 1994 is primarily
due to 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. In 1993, the impact of expenses which are not deductible for tax purposes
resulted in a tax provision despite break-even earnings. These non-deductible
expenses, which include amortization of goodwill, are approximately level each
year and had a smaller impact on the effective tax rate in 1995 and 1994
relative to 1993 due to the higher level of pretax earnings in 1995 and 1994
compared with 1993.
1996 OUTLOOK
HB/PS expects total industry shipments in 1996 to approximate 1995 levels.
The company will continue to focus on market share through new product
introductions and increased placements in 1996. In addition, management expects
improved margins through cost reductions and a further favorable shift in sales
mix to the "better" and "best" product categories. The benefit received in 1995
from foreign tax credit utilization related to the repatriation of foreign
earnings was a one-time benefit that is not expected to recur.
LIQUIDITY AND CAPITAL RESOURCES
Hamilton Beach/Proctor-Silex's credit agreement provides for a revolving
credit facility ("Facility") that permits advances up to $135.0 million. At
December 31, 1995, Hamilton Beach/Proctor-Silex had $52.9 million available
under this Facility. The expiration date of this Facility (which currently is
May 1998) may be extended annually for one additional year upon the mutual
consent of HB/PS and the bank group. In April 1995, the Facility was amended to
provide a lower interest rate if HB/PS achieves a certain interest coverage
ratio and to allow for interest rates quoted under a competitive bid option. At
December 31, 1995, HB/PS also had $25.0 million available under separate
facilities.
32
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Expenditures for property, plant and equipment were $9.7 million in 1995
and $13.4 million in 1994, and are anticipated to be approximately $20.9 million
in 1996. The primary focus of these expenditures is to continue to improve
manufacturing efficiency and to acquire tooling for new and existing products.
Capital for these expenditures has been and is expected to be provided primarily
by internally generated funds and short-term borrowings.
HB/PS's sales mix improved in 1995 with increased sales of products in the
"better" and "best" categories. HB/PS's sales mix between "good," "better" and
"best" were as follows for the year ended December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Good................. 54% 57%
Better............... 21% 20%
Best................. 25% 23%
</TABLE>
HB/PS's ratio of debt-to-total capitalization remains near its 35 percent
target and was 37 percent, 39 percent and 38 percent at December 31, 1995, 1994
and 1993, respectively.
KITCHEN COLLECTION
Kitchen Collection is a national specialty retailer of kitchenware,
tableware, small electric appliances and related accessories. The specialty
retail business is seasonal, with the majority of its revenues and operating
profit generated in the fourth quarter during the fall holiday selling season.
FINANCIAL REVIEW
The results of operations for Kitchen Collection were as follows for the
year ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Number of stores......................................... 134 119 104
Revenues................................................. $69.6 $63.9 $53.7
Operating profit......................................... $ 3.3 $ 5.4 $ 4.8
Net income............................................... $ 1.6 $ 3.1 $ 2.7
</TABLE>
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
<TABLE>
<CAPTION>
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
<S> <C> <C> <C>
1994........................................... $ 63.9 $ 5.4 $ 3.1
Increase (decrease) in 1995 from:
Stores opened in 1995..................... 4.6 .2 .1
Stores opened in 1994..................... 2.9 (.2) (.1 )
Comparable stores......................... (1.8) (.9) (.5 )
Other..................................... -- (1.2) (1.0 )
-------- --------- ------
1995........................................... $ 69.6 $ 3.3 $ 1.6
======== ========= =======
</TABLE>
Kitchen Collection had a net increase in new stores of 15, or approximately
13 percent, in 1995. The increased number of stores, along with a full year's
operation of the 15 stores opened in 1994, resulted in
33
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
increased revenues in 1995 compared with 1994. A difficult retailing environment
in 1995 caused a decrease in customer traffic, resulting in reduced sales at
comparable stores. In addition, margins were negatively impacted by this
environment, along with an overall shift to lower margin products. The
unfavorable variance in other was caused primarily by increased payroll related
costs and store rent escalations.
1994 COMPARED WITH 1993
The following schedule details the components of the changes in revenues,
operating profit and net income for 1994 compared with 1993:
<TABLE>
<CAPTION>
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
<S> <C> <C> <C>
1993........................................... $ 53.7 $ 4.8 $2.7
Increase (decrease) in 1994 from:
Stores opened in 1994..................... 5.5 .6 .4
Stores opened in 1993..................... 4.4 .4 .3
Comparable stores......................... .3 (.2) (.1)
Other..................................... -- (.2) (.2)
-------- --------- ------
1994........................................... $ 63.9 $ 5.4 $3.1
======== ========= =======
</TABLE>
The opening of 37 new stores in 1994 and 1993 contributed favorably to
results in 1994. While gross profit showed a slight improvement in 1994 compared
with 1993, operating profit as a percent of sales declined slightly, due
primarily to store rent escalations and increased costs for renovations at
comparable stores.
OTHER INCOME, EXPENSE AND INCOME TAXES
Interest expense was $0.5 million, $0.3 million and $0.1 million in 1995,
1994 and 1993, respectively. Kitchen Collection's effective tax rate was 41.9
percent, 40.0 percent and 40.6 percent in 1995, 1994 and 1993, respectively.
LIQUIDITY AND CAPITAL RESOURCES
In May 1995, Kitchen Collection entered into a new $5.0 million revolving
credit facility which replaced the previous $2.5 million line of credit. This
new facility has performance-based pricing which provides for reduced interest
rates based on achievement of certain financial performance measures. At
December 31, 1995, KCI had available all of its $5.0 million facility.
Expenditures for property, plant and equipment were $1.4 million in 1995
and $1.0 million in 1994, and are anticipated to be approximately $1.0 million
in 1996. These expenditures are primarily for new store openings and
improvements to existing facilities, and are funded by internally generated
funds and short-term borrowings.
KCI'S capital structure is below its target of 35 percent debt-to-total
capitalization and was 30 percent, 33 percent and 16 percent at December 31,
1995, 1994 and 1993, respectively.
NACCO AND OTHER
FINANCIAL REVIEW
NACCO and Other includes the parent company operations and Bellaire
Corporation ("Bellaire"), a non-operating subsidiary of NACCO. While Bellaire's
operations are minor, it has significant long-term liabilities related to closed
mine activities, 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
34
<PAGE> 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
NACCO and amounted to $3.4 million during 1995 and $4.7 million during 1994, and
are anticipated to be $3.0 million in 1996.
The results of operations at NACCO and Other were as follows for the year
ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----- ------ -----
<S> <C> <C> <C>
Revenues................................................ $ .5 $ .6 $ 3.0
Operating loss.......................................... $(8.8) $(10.0) $(8.0)
Other income (expense), net............................. $ .9 $ (.5) $ 1.7
Loss before extraordinary items......................... $(4.1) $ (5.3) $(2.8)
Extraordinary gain, net-of-tax........................ 32.3 -- --
----- ------ -----
Net income (loss)..................................... $28.2 $ (5.3) $(2.8)
===== ====== =====
</TABLE>
The increased operating loss in 1994 relates primarily to increased
payroll-related expenses at the parent company in 1994 due to higher
incentive-based compensation, profit sharing and medical expenses.
During the third quarter of 1993, a non-recurring tax benefit of $2.3
million was recognized to reflect the impact of the 1 percent increase in the
statutory tax rate on NACCO and Other's deferred tax asset. This tax benefit
decreased the net loss in 1993 relative to 1994 and 1995.
EXTRAORDINARY GAIN
The extraordinary gain of $32.3 million, net of $19.8 million in taxes,
relates to a downward revision in the obligation to the United Mine Workers of
America Combined Benefit Fund ("UMWA"). This obligation was recognized by
Bellaire as an extraordinary charge in 1992 to accrue for the estimated costs
associated with the Coal Industry Retiree Health Benefit Act of 1992 ("Coal
Act"). It is the Company's policy to periodically review the estimates and
assumptions upon which various liability reserves are based. As a result of a
review of the assumptions relating to the number of Company and industry covered
beneficiaries ultimately assigned to Bellaire, and the trend of health care
costs, the aggregate estimated costs associated with the Coal Act are expected
to be lower than originally anticipated. Management believes that the revised
liability of $69.3 million, net of $33.3 million of deferred taxes, more
accurately represents the future cost of this obligation.
INTEREST RATE PROTECTION
NMHG, Hamilton Beach-Proctor-Silex, North American Coal and Kitchen
Collection have entered into interest rate swap agreements and/or purchased
interest rate caps for portions of their floating rate debt. These interest rate
swaps and caps provide protection against significant increases in interest
rates, and have terms ranging from three months to seven years. The Company
evaluates its exposure to floating rate debt on an ongoing basis. The notional
amounts, fixed rates paid and remaining duration of these swaps and caps for
each subsidiary are included in Note 13 to the consolidated financial statements
on page F-17 of this annual report.
ENVIRONMENTAL MATTERS
The Company's manufacturing operations, like those of other companies
engaged in similar businesses, involve the use, disposal and cleanup of
substances regulated under environmental protection laws. The Company's North
American Coal subsidiary is 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, North American Coal is attentive to any changes which
may arise due to proposed legislation concerning the Clean Air Act Amendments of
1990, reauthorization of the Resource Conservation and Recovery Act, the Clean
Water Act, the Endangered Species Act and other regulatory actions.
35
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Compliance with these increasingly stringent standards results in higher
expenditures for both capital improvements and operating costs. The Company's
policies stress environmental responsibility and compliance with these
regulations. Based on current information, management does not expect compliance
with these regulations to have a material adverse effect on its financial
condition or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Although the subsidiaries have entered into substantial debt agreements,
NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
The debt agreements at Hamilton Beach-Proctor/Silex and Kitchen Collection
allow for the payment of dividends under certain circumstances. The revised
credit agreement entered into on February 28, 1995, by NMHG allows the transfer
of up to $25.0 million to NACCO; there have not yet been any such transfers.
There are no restrictions for North American Coal, and its dividends and
advances are the primary source of cash for NACCO.
The Company believes it can adequately meet all of its current and
long-term commitments and operating needs. This outlook stems from amounts
available under revolving credit facilities and the utility customers' funding
of the project mining subsidiaries.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company has not yet adopted either SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" or
SFAS No. 123 "Accounting for Stock Based Compensation." A discussion of these
two standards, which are not expected to materially impact the Company's
financial condition, is included in Notes 7 and 15 to the consolidated financial
statements on pages F-12 and F-18, respectively, of this annual report.
EFFECTS OF INFLATION
The Company believes that inflation has not materially affected its results
of operations in 1995 and does not expect inflation to be a significant item in
1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth at pages F-1 through
F-33 of the Financial Statements and Supplementary Data contained in Part IV
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is set forth in the
1996 Proxy Statement under the heading "Business to be Transacted -- 1. Election
of Directors," which information is incorporated herein by reference.
Information regarding the executive officers of the Company is included as Item
4A of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.
36
<PAGE> 38
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth in the 1996
Proxy Statement under the headings "Business to be Transacted -- 1. Election of
Directors -- Compensation of Directors," and "Compensation of Executive
Officers," which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management is set forth in the 1996 Proxy Statement under the heading
"Business to be Transacted -- 1. Election of Directors -- Beneficial Ownership
of Class A Common and Class B Common," which information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions
is set forth in the 1996 Proxy Statement under the heading "Business to be
Transacted -- 1. Election of Directors -- Compensation Committee Interlocks and
Insider Participation and Certain Relationships and Related Transactions" 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 has not filed any current reports on Form 8-K during the
fourth quarter of 1995.
(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-29 of this Annual Report on Form 10-K.
37
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
NACCO Industries, Inc.
By: /s/ FRANK B. O'BRIEN
Frank B. O'Brien
Senior Vice President --
Corporate
Development and Chief
Financial Officer (Principal
Financial Officer)
Date: March 28, 1996
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.
<TABLE>
<S> <C> <C>
* ALFRED M. RANKIN, JR. Chairman, President and March 28, 1996
Alfred M. Rankin, Jr. Chief Executive Officer
(Principal Executive
Officer), Director
/s/ FRANK B. O'BRIEN Senior Vice President -- March 28, 1996
Frank B. O'Brien Corporate Development
and Chief Financial
Officer (Principal
Financial Officer)
/s/ STEVEN M. BILLICK Vice President and March 28, 1996
Steven M. Billick Controller (Principal
Accounting Officer)
* OWSLEY BROWN II Director March 28, 1996
Owsley Brown II
* JOHN J. DWYER Director March 28, 1996
John J. Dwyer
* ROBERT M. GATES Director March 28, 1996
Robert M. Gates
* LEON J. HENDRIX, JR. Director March 28, 1996
Leon J. Hendrix, Jr.
* DENNIS W. LABARRE Director March 28, 1996
Dennis W. LaBarre
* IAN M. ROSS Director March 28, 1996
Ian M. Ross
* JOHN C. SAWHILL Director March 28, 1996
John C. Sawhill
* BRITTON T. TAPLIN Director March 28, 1996
Britton T. Taplin
* FRANK E. TAPLIN, JR. Director March 28, 1996
Frank E. Taplin, Jr.
</TABLE>
*Frank B. O'Brien, by signing his name hereto, does hereby sign this Annual
Report on Form 10-K on behalf of each of the above named and designated officers
and directors of the Company pursuant to a Power of Attorney executed by such
persons and filed with the Securities and Exchange Commission.
<TABLE>
<S> <C> <C>
FRANK B. O'BRIEN March 28, 1996
Frank B. O'Brien, Attorney-in-Fact
</TABLE>
38
<PAGE> 40
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, 1995
NACCO INDUSTRIES, INC.
MAYFIELD HEIGHTS, OHIO
F-1
<PAGE> 41
FORM 10-K
ITEM 14(A)(1) AND (2)
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of NACCO Industries, Inc.
and Subsidiaries are included in Item 8:
Report of Independent Public Accountants--Year ended December 31,
1995, 1994 and 1993.
Consolidated statements of income--Year ended December 31, 1995, 1994
and 1993.
Consolidated balance sheets--December 31, 1995 and December 31, 1994.
Consolidated statements of cash flows--Year ended December 31, 1995,
1994 and 1993.
Consolidated statements of stockholders' equity--Year ended December
31, 1995, 1994 and 1993.
Notes to consolidated financial statements.
NACCO Industries, Inc. Report of Management.
The following consolidated financial statement schedules of NACCO
Industries, Inc. and Subsidiaries are included in Item 14(d):
<TABLE>
<S> <C>
Schedule I Condensed Financial Information of the Parent
Schedule II Valuation and qualifying accounts
</TABLE>
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
<PAGE> 42
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, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements and the schedules referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NACCO Industries, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a)(1) and
(2) and Item 14(d) of Form 10-K are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Cleveland, Ohio
February 22, 1996
F-3
<PAGE> 43
CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales.............................................. $2,190,375 $1,853,479 $1,538,805
Other operating income................................. 14,142 11,408 10,566
---------- ---------- ----------
TOTAL REVENUES............................... 2,204,517 1,864,887 1,549,371
Cost of sales.......................................... 1,778,779 1,491,771 1,248,439
---------- ---------- ----------
GROSS PROFIT................................. 425,738 373,116 300,932
Selling, administrative and general expenses........... 260,902 228,619 198,149
Amortization of goodwill............................... 13,774 13,725 13,787
---------- ---------- ----------
OPERATING PROFIT............................. 151,062 130,772 88,996
Other income (expense)
Interest income................................... 1,850 1,615 1,880
Interest expense.................................. (51,879) (56,076) (61,542)
Other -- net...................................... 2,485 2,185 (4,670)
---------- ---------- ----------
(47,544) (52,276) (64,332)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST
AND EXTRAORDINARY ITEMS.................... 103,518 78,496 24,664
Provision for income taxes............................. 34,681 30,730 13,511
---------- ---------- ----------
INCOME BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEMS........................ 68,837 47,766 11,153
Minority interest...................................... (3,331) (2,494) 440
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS............ 65,506 45,272 11,593
Extraordinary items:
Extraordinary gain, net-of-tax.................... 32,333
Extraordinary charges, net-of-tax................. (3,399) (3,218) (3,292)
---------- ---------- ----------
NET INCOME................................... $ 94,440 $ 42,054 $ 8,301
========= ========= =========
PER SHARE:
Income Before Extraordinary Items...................... $ 7.31 $ 5.06 $ 1.30
Extraordinary items:
Extraordinary gain, net-of-tax.................... 3.61
Extraordinary charges, net-of-tax................. (.38) (.36) (.37)
---------- ---------- ----------
Net Income............................................. $ 10.54 $ 4.70 $ .93
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 44
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................... $ 30,924 $ 19,541
Accounts receivable, net....................................... 284,235 236,215
Inventories.................................................... 388,819 298,987
Prepaid expenses and other..................................... 18,027 31,893
---------- ----------
722,005 586,636
OTHER ASSETS........................................................ 38,289 41,341
PROPERTY, PLANT AND EQUIPMENT, NET.................................. 534,477 485,314
DEFERRED CHARGES
Goodwill, net.................................................. 465,051 471,574
Deferred costs and other....................................... 56,725 69,257
Deferred income taxes.......................................... 17,290 40,200
---------- ----------
539,066 581,031
---------- ----------
TOTAL ASSETS.............................................. $1,833,837 $1,694,322
========= =========
</TABLE>
F-5
<PAGE> 45
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................... $ 250,662 $ 226,892
Revolving credit agreements.................................... 95,736 30,760
Current maturities of long-term obligations.................... 19,864 63,509
Income taxes................................................... 4,672 18,662
Accrued payroll................................................ 29,827 28,018
Other current liabilities...................................... 122,961 113,597
---------- ----------
523,722 481,438
NOTES PAYABLE -- not guaranteed by the parent company............... 320,200 286,717
OBLIGATIONS OF PROJECT MINING SUBSIDIARIES --
not guaranteed by the parent company or
its North American Coal subsidiary............................. 346,472 331,876
SELF-INSURANCE RESERVES AND OTHER................................... 229,302 274,358
MINORITY INTEREST................................................... 44,014 40,542
STOCKHOLDERS' EQUITY
Common stock:
Class A, par value $1 per share, 7,256,971 shares outstanding
(1994 -- 7,228,739 shares outstanding).................... 7,257 7,229
Class B, par value $1 per share, convertible into Class A
on a one-for-one basis, 1,709,453 shares outstanding
(1994 -- 1,722,981 shares outstanding).................... 1,709 1,723
Capital in excess of par value................................. 3,591 2,788
Retained income................................................ 350,301 262,226
Foreign currency translation adjustment and other.............. 7,269 5,425
---------- ----------
370,127 279,391
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................ $1,833,837 $1,694,322
========= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 46
CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1995 1994 1993
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................. $ 94,440 $ 42,054 $ 8,301
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary gain, net-of-tax.................... (32,333)
Extraordinary charges, net-of-tax................. 2,161 1,022 2,007
Depreciation, depletion and amortization.......... 79,252 80,154 78,063
Deferred income taxes............................. 1,464 3,985 5,176
Other non-cash items.............................. 2,074 (6,165) (7,944)
Working capital changes:
Accounts receivable............................... (38,563) (31,180) (22,926)
Inventories....................................... (85,618) (54,791) 8,505
Other current assets.............................. 2,455 (5,353) (2,213)
Accounts payable and other liabilities............ 6,799 68,054 3,341
--------- --------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 32,131 97,780 72,310
INVESTING ACTIVITIES
Expenditures for property, plant and equipment......... (73,131) (52,564) (57,661)
Proceeds from the sale of other assets................. 1,345 11,144 27,600
Notes receivable....................................... 665 1,412 4,664
Acquisition of businesses.............................. (7,288)
--------- --------- --------
NET CASH USED BY INVESTING ACTIVITIES.......... (78,409) (40,008) (25,397)
FINANCING ACTIVITIES
Additions to long-term obligations and revolving
credit.............................................. 328,178 122,055 31,373
Reductions of long-term obligations and revolving
credit.............................................. (276,579) (192,679) (84,533)
Additions to obligations of project mining
subsidiaries........................................ 92,946 56,394 51,517
Reductions of obligations of project mining
subsidiaries........................................ (102,070) (67,658) (67,291)
Financing of other short-term obligations.............. 10,805 11,884 16,172
Cash dividends paid.................................... (6,365) (6,040) (5,854)
Capital grants......................................... 4,017 1,622 3,741
Other -- net........................................... 5,609 3,596 4,746
--------- --------- --------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES................................... 56,541 (70,826) (50,129)
Effect of exchange rate changes on cash................ 1,120 3,446 (1,482)
--------- --------- --------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the year....................... 11,383 (9,608) (4,698)
Balance at the beginning of the year................... 19,541 29,149 33,847
--------- --------- --------
BALANCE AT THE END OF THE YEAR......................... $ 30,924 $ 19,541 $ 29,149
========= ========= ========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 47
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CLASS A COMMON STOCK
Beginning balance.......................................... $ 7,229 $ 7,177 $ 7,113
Conversion of Class B shares to Class A shares............. 14 43 60
Sale of treasury shares under stock option and compensation
plans................................................... 14 11 4
Purchase of treasury shares................................ (2)
-------- -------- --------
7,257 7,229 7,177
-------- -------- --------
CLASS B COMMON STOCK
Beginning balance.......................................... 1,723 1,764 1,823
Conversion of Class B shares to Class A shares............. (14) (43) (60)
Sale of shares under stock option plans.................... 2 1
-------- -------- --------
1,709 1,723 1,764
-------- -------- --------
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance.......................................... 2,788 2,548 2,342
Sale of shares under stock option and compensation plans... 803 348 206
Purchase of treasury shares................................ (108)
-------- -------- --------
3,591 2,788 2,548
-------- -------- --------
RETAINED INCOME
Beginning balance.......................................... 262,226 226,212 223,765
Net income................................................. 94,440 42,054 8,301
Cash dividends on Class A and Class B common stock:
1995 $.710 per share.................................... (6,365)
1994 $.675 per share.................................... (6,040)
1993 $.655 per share.................................... (5,854)
-------- -------- --------
350,301 262,226 226,212
-------- -------- --------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT AND OTHER
Beginning balance.......................................... 5,425 (2,075) 3,273
Foreign currency translation adjustment and other.......... 1,844 7,500 (5,348)
-------- -------- --------
7,269 5,425 (2,075)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY......................... $370,127 $279,391 $235,626
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 48
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGE DATA)
NOTE 1 -- NATURE OF OPERATIONS
The Company has four operating subsidiaries which function in distinct
business environments, including forklift truck manufacturing and service parts
distribution, small electric appliance manufacturing, mining and retail.
NMHG designs, manufactures and markets forklift trucks and related service
parts under the Hyster(R) and Yale(R) brand names. NMHG's manufacturing plants
are located primarily in the United States and Europe. In addition, NMHG has
manufacturing facilities in Japan through its S-N joint venture. While NMHG's
market position is strongest in North America, it also has a significant
presence in Europe and a growing position in Asia-Pacific.
HB/PS designs, manufactures and markets small electric appliances covering
approximately 80 percent of the small kitchen electric appliance market. The
company manufactures the majority of its products at its plants located in North
America and also sources some of its products from the Far East. HB/PS primarily
sells its products to retailers and distributors in North America.
NACoal mines and markets lignite for use primarily as fuel in power
generation by electric utilities. The company operates four surface lignite
mines, two in North Dakota and one each in Texas and Louisiana. Each of these
lignite mines operates under long-term contracts to sell lignite at a price
based on actual costs plus an agreed pretax profit per ton. In addition, NACoal
provides dragline mining services at a limerock quarry in Florida.
KCI is a national specialty retailer of kitchenware and small electric
appliances with stores located primarily in factory outlet malls. KCI operates
stores under the Kitchen Collection(R) and Hearthstone(TM) names and sells
brand-name kitchenware, tableware, small electric appliances and related
accessories.
NOTE 2 -- ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of NACCO Industries, Inc. ("NACCO," the parent company) and its
majority owned subsidiaries (NACCO Industries, Inc. and Subsidiaries -- the
"Company"). Intercompany accounts and transactions are eliminated.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and 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 manufacturing
inventories in the United States and under the first-in, first-out (FIFO) method
with respect to all other inventories.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded
at cost. Depreciation, depletion and amortization are provided in amounts
sufficient to amortize the cost of the assets (including assets recorded under
capital leases) over their estimated useful lives using the straight-line
method. The units-of-production method is used to amortize certain coal-related
assets based on estimated recoverable tonnages.
F-9
<PAGE> 49
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
GOODWILL: Goodwill represents the excess purchase price paid over the fair
value of the net assets acquired. The amortization of goodwill is determined on
a straight-line basis over a 40-year period. Management regularly evaluates its
accounting for goodwill considering such factors as historical and future
profitability and believes that the asset is realizable and the amortization
period remains appropriate.
DEFERRED FINANCING COSTS: Amortization of the costs related to
manufacturing assets is calculated utilizing the interest method over the term
of the related indebtedness. The costs incurred related to the coal assets are
amortized utilizing the units-of-production method. Amortization of these costs
is included in interest expense on the Company's consolidated statements of
income.
PRODUCT DEVELOPMENT COSTS: Expenses associated with the development of new
products and changes to existing products are charged to expense as incurred.
These costs amounted to $27.5 million, $25.9 million and $23.4 million in 1995,
1994 and 1993, respectively.
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, 1995, was
25,000,000 shares and 6,756,176 shares, respectively. Treasury shares of Class A
stock totalling 817,418 and 832,122 at December 31, 1995 and 1994, respectively,
have been deducted from shares outstanding.
FOREIGN CURRENCY: The financial statements of the Company's foreign
operations are translated into U.S. dollars at year-end exchange rates for
assets and liabilities, and at weighted average exchange rates during the year
for revenues and expenses. The effect of changes in foreign exchange rates
applied to these foreign financial statements is included as a separate
component of stockholders' equity.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS: The fair values
of financial instruments have been determined through information obtained from
quoted market sources and management estimates. The Company does not hold or
issue financial instruments or derivative financial instruments for trading
purposes.
The Company enters into forward foreign exchange contracts with terms of
one-to-twelve months. These contracts hedge certain foreign currency denominated
receivables and payables and foreign currency commitments. Gains and losses on
these contracts are deferred and recognized as part of the cost of the
underlying transaction being hedged.
The Company also enters into interest rate swap agreements with terms
ranging from three months to seven years. The difference between the floating
interest rate and fixed interest rate which is to be paid or received is
recognized in interest expense as the floating interest rate changes over the
life of the agreement.
EARNINGS PER SHARE: The calculation of net income per share is based on the
weighted average number of shares outstanding during each period.
RECLASSIFICATIONS: Certain amounts in the prior periods' consolidated
financial statements have been reclassified to conform to the current period's
presentation.
NOTE 3 -- EXTRAORDINARY ITEMS
EXTRAORDINARY GAIN
The extraordinary gain of $32.3 million (recognized in 1995), net of $19.8
million in taxes, relates to a downward revision in the obligation to the United
Mine Workers of America Combined Benefit Fund ("UMWA"). This obligation was
recognized by Bellaire as an extraordinary charge in 1992 to accrue for the
estimated costs associated with the Coal Industry Retiree Health Benefit Act of
1992 ("Coal Act"), which is discussed in more detail in Note 11 on page F-16. It
is the Company's policy to periodically review the
F-10
<PAGE> 50
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
estimates and assumptions upon which various liability reserves are based. As a
result of a review of the assumptions relating to the number of Company and
industry covered beneficiaries ultimately assigned to Bellaire, and the trend of
health care costs, the aggregate estimated costs associated with the Coal Act
are expected to be lower than originally anticipated. Management believes that
the revised liability of $69.3 million, net of deferred taxes, more accurately
represents the future cost of this obligation.
EXTRAORDINARY CHARGES
The extraordinary charges recognized in 1995, 1994 and 1993 relate to the
write-off of premiums and unamortized financing fees. The 1995 extraordinary
charge includes a $1.3 million charge recognized in the first quarter, when
NMHG's former revolving credit facility and senior term loan was replaced by the
new long-term credit agreement. In the third quarter of 1995 a charge of $2.1
million was recognized. This charge, as well as the 1994 and 1993 charges,
represents the write-off of premiums and unamortized debt issuance costs
associated with the retirement of $78.5 million, $70.0 million and $50.0 million
face-value Hyster-Yale 12 3/8% debentures, respectively. These retirements were
achieved using bank borrowings, internally generated funds of NMHG and equity
infusions from existing stockholders.
NOTE 4 -- ACCOUNTS RECEIVABLE
Allowances for doubtful accounts, returns, discounts and adjustments of
$11.3 million and $10.6 million at December 31, 1995 and 1994, respectively,
were deducted from accounts receivable.
NOTE 5 -- INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1995 1994
------ ------
<S> <C> <C>
Manufacturing inventories:
Finished goods and service parts --
NACCO Materials Handling Group.............................. $117.4 $ 82.3
Hamilton Beach/Proctor-Silex................................ 43.3 32.8
------ ------
160.7 115.1
------ ------
Raw materials and work in process --
NACCO Materials Handling Group.............................. 182.0 137.9
Hamilton Beach/Proctor-Silex................................ 15.7 15.9
------ ------
197.7 153.8
------ ------
LIFO reserve --
NACCO Materials Handling Group.............................. (13.3) (11.4)
Hamilton Beach/Proctor-Silex................................ (.3) (.1)
------ ------
(13.6) (11.5)
------ ------
Total manufacturing inventories................................ 344.8 257.4
North American Coal:
Coal........................................................... 10.6 8.4
Mining supplies................................................ 19.1 18.8
Retail inventories -- Kitchen Collection......................... 14.3 14.4
------ ------
$388.8 $299.0
====== ======
</TABLE>
F-11
<PAGE> 51
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The cost of manufacturing inventories has been determined by the LIFO
method for 66 percent and 69 percent of such inventories at December 31, 1995
and 1994, respectively.
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1995 1994
------ ------
<S> <C> <C>
Coal lands and real estate:
NACCO Materials Handling Group................................... $ 6.4 $ 6.0
Hamilton Beach/Proctor-Silex..................................... .8 .8
North American Coal.............................................. 15.3 14.8
Project mining subsidiaries (Note 10)............................ 77.1 54.0
Kitchen Collection............................................... .1 .1
NACCO and Other.................................................. .3 .9
------ ------
100.0 76.6
------ ------
Plant and equipment:
NACCO Materials Handling Group................................... 250.6 208.4
Hamilton Beach/Proctor-Silex..................................... 111.7 105.5
North American Coal.............................................. 18.2 15.2
Project mining subsidiaries (Note 10)............................ 428.2 409.3
Kitchen Collection............................................... 7.3 6.0
NACCO and Other.................................................. 4.1 4.1
------ ------
820.1 748.5
------ ------
Property, plant and equipment at cost.............................. 920.1 825.1
Less allowances for depreciation, depletion and amortization..... 385.7 339.8
------ ------
$534.4 $485.3
====== ======
</TABLE>
Total depreciation, depletion and amortization expense on property, plant
and equipment was $63.9 million, $63.2 million and $60.1 million during 1995,
1994 and 1993, respectively.
Proven and probable coal reserves approximated 2.1 billion tons at December
31, 1995, and 2.2 billion tons at December 31, 1994.
NOTE 7 -- ACCOUNTING FOR LONG-LIVED ASSETS
In March 1995, Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" was issued. The Company will be required to adopt this new
method of accounting in the first quarter of 1996. This new standard requires,
among other things, that assets covered by this standard be written down to
their fair values (as defined) when certain conditions exist. The adoption of
this standard will not materially impact the Company's financial condition or
its results of operations.
NOTE 8 -- DEFERRED CHARGES
Accumulated amortization of goodwill, patents and trademarks was $94.7
million and $80.5 million at December 31, 1995 and 1994, respectively. Total
amortization expense of these items was $14.1 million during 1995 and 1994 and
$14.3 million during 1993.
F-12
<PAGE> 52
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Total amortization expense of deferred financing costs was $1.2 million,
$3.0 million and $3.7 million during 1995, 1994 and 1993, respectively.
NOTE 9 -- REVOLVING CREDIT AGREEMENTS AND NOTES PAYABLE
NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
REVOLVING CREDIT AGREEMENTS
NACCO MATERIALS HANDLING GROUP
NMHG's credit agreement provides for an unsecured revolving credit facility
("Facility") that permits advances up to $350.0 million. The following
summarizes this Facility:
<TABLE>
<S> <C>
Amount of revolver.......................................................... $350.0
Amount available at December 31, 1995....................................... $ 75.0
Interest rate at December 31, 1995.......................................... 6.7%
Average interest rate during 1995........................................... 6.3%
Facility fee at December 31, 1995........................................... 0.3%
</TABLE>
At December 31, 1995, NMHG had $275.0 million outstanding under this
Facility, $245.9 million of which is classified as long-term because it is not
expected to be repaid during 1996. The company entered into this Facility on
February 28, 1995, to replace its existing bank agreement and to refinance the
majority of its existing long-term debt. The expiration date of this Facility
(which currently is February 2000) may be extended annually for one additional
year upon the mutual consent of NMHG and the bank group. In addition, this
Facility has performance-based pricing which provides the company with reduced
interest rates upon achievement of certain financial performance targets. NMHG
also has separate facilities totalling $30.5 million, of which $26.5 million was
available at December 31, 1995.
HAMILTON BEACH/PROCTOR-SILEX
HB/PS's credit agreement provides for a revolving credit facility
("Facility") that permits advances up to $135.0 million and is secured by
substantially all assets of HB/PS. The following summarizes this Facility:
<TABLE>
<S> <C>
Amount of revolver.......................................................... $135.0
Amount available at December 31, 1995....................................... $ 52.9
Interest rate at December 31, 1995.......................................... 6.2%
Average interest rate during 1995........................................... 6.6%
Facility fee at December 31, 1995........................................... 0.2%
</TABLE>
At December 31, 1995, HB/PS had $82.1 million outstanding under this
Facility, $65.0 million of which is classified as long-term because it is not
expected to be repaid during 1996. The expiration date of this Facility (which
currently is May 1998) may be extended annually for one additional year upon the
mutual consent of HB/PS and the bank group. In April 1995 this facility was
amended to provide a lower interest rate if HB/PS achieves a certain interest
coverage ratio, and to allow for interest rates quoted under a competitive bid
option. At December 31, 1995, HB/PS also had $25.0 million available under
separate facilities.
F-13
<PAGE> 53
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NORTH AMERICAN COAL
NACoal has in place a revolving credit facility summarized as follows:
<TABLE>
<S> <C>
Amount of revolver.......................................................... $ 50.0
Amount available at December 31, 1995....................................... $ 50.0
Average interest rate during 1995........................................... 5.9%
Total commitment and facility fee at December 31, 1995...................... 0.2%
</TABLE>
The expiration date of this facility (which currently is September 2000)
may be extended annually for one additional year upon the mutual consent of
NACoal and the bank group.
NOTES PAYABLE
Subsidiary notes payable, less current maturities, consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1995 1994
------ ------
<S> <C> <C>
NACCO MATERIALS HANDLING GROUP
Long-term portion of revolving credit facility........................... $245.9 $ 33.0
Term note................................................................ 95.3
12.375% senior subordinated debentures................................... 78.5
Other.................................................................... 4.1 4.6
------ ------
Total NMHG............................................................ 250.0 211.4
HAMILTON BEACH/PROCTOR-SILEX
Long-term portion of revolving credit facility........................... 65.0 70.0
KITCHEN COLLECTION
Term note with an interest rate of 7.8% at year-end
(average interest rate of 7.7% during 1995) payable 1999 to 2000...... 5.0 5.0
NORTH AMERICAN COAL........................................................ .2 .3
------ ------
$320.2 $286.7
====== ======
</TABLE>
The maturities of the subsidiary notes payable for the next five years,
including current maturities, are as follows:
<TABLE>
<S> <C>
1996............................................................... $2.0
1997............................................................... .5
1998............................................................... .3
1999............................................................... 2.6
2000............................................................... 2.5
Thereafter......................................................... .2
----
$8.1
====
</TABLE>
Interest paid was $42.6 million, $44.0 million and $48.4 million during
1995, 1994 and 1993, respectively.
The credit agreements for NMHG, HB/PS, NACoal and KCI contain certain
covenants and restrictions. Covenants require, among other things, maintenance
of certain minimum amounts of net worth and certain specified ratios of working
capital, debt to equity, interest coverage and fixed charge coverage. These
ratios are calculated at the subsidiary level. Restrictions include limits on
capital expenditures and dividends. At December 31, 1995, the subsidiaries were
in compliance with all of the covenants in their debt agreements.
F-14
<PAGE> 54
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10 -- OBLIGATIONS OF PROJECT MINING SUBSIDIARIES
NACoal's project mining subsidiaries have entered into long-term contracts
with various utility customers to provide lignite at a sales price based on cost
plus a profit per ton. The utility customers have arranged and guaranteed the
financing for the development and operation of these subsidiary mines. The
obligations of these project mining subsidiaries included in the Company's
consolidated balance sheets do not affect the short- or long-term liquidity of
the Company and are without recourse to NACCO or its NACoal subsidiary.
Obligations of project mining subsidiaries, less current maturities,
consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Capitalized lease obligations...................................... $146.4 $140.1
Non-interest-bearing advances from customers....................... 176.4 136.0
Promissory notes with interest rates ranging from 5.0% to 8.7%
during 1995...................................................... 23.7 55.7
------ ------
$346.5 $331.8
====== ======
</TABLE>
The annual maturities of the promissory notes are: 1996 -- $5.1 million;
1997 -- $6.1 million; 1998 -- $3.1 million; 1999 -- $3.2 million; 2000 -- $3.2
million; thereafter -- $8.1 million. Advances from customers are used to
develop, operate and provide for the ongoing working capital needs of certain
project mining subsidiaries.
Interest paid was $14.3 million, $17.7 million and $17.5 million during
1995, 1994 and 1993, respectively. Interest expense is included as part of the
cost of coal, which is passed through to the utility customers.
The project mining subsidiaries'capital lease obligations for mining
equipment have the following future minimum lease payments at December 31, 1995:
<TABLE>
<S> <C>
1996....................................................................... $ 23.1
1997....................................................................... 22.2
1998....................................................................... 21.5
1999....................................................................... 21.1
2000....................................................................... 20.2
Subsequent to 2000......................................................... 139.7
------
Total minimum lease payments............................................... 247.8
Amounts representing interest.............................................. (90.2)
------
Present value of net minimum lease payments................................ 157.6
Current maturities......................................................... (11.2)
------
$146.4
======
</TABLE>
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 with
property, plant and equipment and consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Plant and equipment.............................................. $201.0 $188.1
Less accumulated amortization.................................... 78.3 71.6
------ ------
$122.7 $116.5
====== ======
</TABLE>
F-15
<PAGE> 55
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
During 1995, 1994 and 1993, the project mining subsidiaries incurred
capital lease obligations of $18.0 million, $5.2 million and $22.4 million,
respectively, in connection with lease agreements to acquire plant and
equipment.
The above obligations are secured by substantially all owned assets of the
respective project mining subsidiary and the assignment of all rights under its
coal sales agreement.
NOTE 11 -- SELF-INSURANCE RESERVES AND OTHER
Self-insurance reserves and other consisted of the following at December
31:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Present value of closed mine obligations........................... $ 53.8 $ 70.8
Reserve for future interest on obligation to UMWA.................. 64.2 103.9
------ ------
118.0 174.7
Other self-insurance reserves...................................... 111.3 99.7
------ ------
$229.3 $274.4
====== ======
</TABLE>
The closed mine obligations relate to Bellaire's (a wholly-owned
non-operating subsidiary of NACCO) former eastern underground mining operations
and the Indian Head Mine, which ceased operations in 1992. Included in these
obligations is the obligation to the United Mine Workers of America Combined
Benefit Fund ("UMWA") which resulted from the Coal Industry Retiree Health
Benefit Act of 1992 ("Coal Act"). The Coal Act requires Bellaire to incur
additional costs for retiree medical expenses of certain United Mine Worker
retirees. Annual cash payments of up to $3.0 million after tax are expected
relating to this obligation and could continue for as long as 40 to 50 years.
The Company has recorded this obligation on an undiscounted basis. The reserve
for future interest represents the portion of this reserve comprising interest
costs. In addition, the 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 workers compensation and black lung
benefit costs.
The other self-insurance reserves primarily include product liability
reserves, employee postretirement benefit obligations and other miscellaneous
reserves.
NOTE 12 -- LEASE COMMITMENTS
Future minimum operating lease payments, excluding project mining
subsidiaries, at December 31, 1995, are as follows:
<TABLE>
<S> <C>
1996........................................................................ $17.5
1997........................................................................ 15.4
1998........................................................................ 13.9
1999........................................................................ 11.3
2000........................................................................ 9.3
Thereafter.................................................................. 18.2
-----
$85.6
=====
</TABLE>
Rental expense for all operating leases, excluding project mining
subsidiaries, amounted to $20.7 million, $16.9 million and $15.3 million during
1995, 1994 and 1993, respectively.
F-16
<PAGE> 56
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13 -- FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS
A financial instrument is cash or a contract that imposes an obligation to
deliver, or conveys a right to receive, cash or another financial instrument.
The fair value of financial instruments approximated carrying values at December
31, 1995.
INTEREST RATE DERIVATIVES
The Company's operating subsidiaries enter into interest rate swap and/or
cap agreements ("swaps" and "caps"). The use of swaps and caps allows these
subsidiaries to enter into long-term credit agreements that have
performance-based, floating rates of interest and then exchange them for fixed
rates, as opposed to entering into higher cost fixed-rate credit arrangements.
These agreements are with major commercial banks; therefore, the risk of credit
loss from non-performance by the banks is minimal. The following table
summarizes the notional amounts, related rates (including applicable margins)
and remaining terms on interest rate swap agreements outstanding at December 31,
1995:
<TABLE>
<CAPTION>
NOTIONAL FIXED RATE
AMOUNT PAID REMAINING TERM
-------- ---------- ----------------------
<S> <C> <C> <C>
NACCO Materials Handling Group......... $210.0 6.1% One Month to Six Years
Hamilton Beach/Proctor-Silex........... $ 60.0 6.2% One to Three Years
North American Coal.................... $ 10.0 6.6% Seven Months
Kitchen Collection..................... $ 5.0 7.8% Four Years
</TABLE>
FOREIGN CURRENCY DERIVATIVES
NMHG and HB/PS enter into forward foreign exchange contracts for purposes
of hedging their exposure to foreign currency exchange rate fluctuations. These
contracts are with major financial institutions; therefore, the risk of credit
loss from non-performance by these institutions is minimal. These contracts
hedge primarily firm commitments and, to a lesser degree, forecasted commitments
relating to cash flows associated with sales and purchases denominated in
foreign currencies. NMHG and HB/PS had foreign exchange contracts outstanding in
the amount of $293.2 million and $3.8 million, respectively, at December 31,
1995. The deferred loss on these contracts at December 31, 1995 was not
material.
NOTE 14 -- CONTINGENCIES
Various legal proceedings and claims have been or may be asserted against
NACCO and certain subsidiaries relating to the conduct of its business,
including product liability and environmental claims. These proceedings are
incidental to their ordinary course of business. 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 that, after consultation with
its General Counsel, the likelihood that material costs will be incurred in
excess of accruals already recognized is remote.
NMHG is subject to recourse or repurchase obligations under various
financing arrangements for certain independently owned retail dealerships at
December 31, 1995. 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 obligation at December 31,
1995, were $100.8 million. Losses anticipated under the terms of the recourse or
repurchase obligations are not significant and have been reserved for in the
financial statements.
F-17
<PAGE> 57
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 15 -- STOCK OPTIONS
The 1975 and 1981 stock option plans as amended provide for the granting to
officers and other key employees options to purchase Class A and Class B common
stock of the Company at a price not less than the market value of such stock at
the date of grant. Options become exercisable over a four-year period and expire
10 years from the date of the grant. At December 31, 1995, all stock options
outstanding were exercisable. There were options for 80,701 Class A shares at
December 31, 1995 and 1994, respectively, and 80,100 Class B shares at December
31, 1995 and 1994, respectively, available for grant under these plans. The
Company does not, however, intend to issue any additional stock options. At
December 31, 1995, there were options relating to Class A shares for 5,800
shares with an option price of $32.00 that were granted on January 12, 1989, and
25,000 shares at an option price of $35.56 granted on March 1, 1989.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" was issued. This new standard
requires, among other things, additional footnote disclosures relating to stock
options granted on or after January 1, 1995. Because the Company does not intend
to grant any additional stock options, this standard will not impact the
Company's disclosures.
NOTE 16 -- OTHER - NET
Items included in other-net income (expense) for the year ended December 31
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- -----
<S> <C> <C> <C>
Equity in earnings (losses) of unconsolidated subsidiaries... $ 3.2 $1.0 $(3.9)
Litigation settlement........................................ -- -- (3.5)
Gain (loss) on sale of assets................................ (.4) (.1) 2.3
Currency transaction gains (losses).......................... (1.5) (.8) .1
Miscellaneous................................................ 1.2 2.1 .3
----- ---- -----
$ 2.5 $2.2 $(4.7)
===== ==== =====
</TABLE>
F-18
<PAGE> 58
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 17 -- INCOME TAXES
The components of income before income taxes and provision for income taxes
for the year ended December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ----- -----
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS
Domestic................................................. $ 79.3 $57.1 $18.3
Foreign.................................................. 24.2 21.4 6.4
------ ----- -----
$103.5 $78.5 $24.7
====== ===== =====
PROVISION FOR INCOME TAXES
Current tax expense:
Federal............................................... $ 28.4 $24.3 $ 8.4
State................................................. 4.9 3.0 2.7
Foreign............................................... 4.2 7.8 4.4
------ ----- -----
Total current....................................... 37.5 35.1 15.5
------ ----- -----
Deferred tax expense (benefit):
Federal............................................... (3.3) (1.1) 3.6
State................................................. (.8) (.1) (1.2)
Foreign............................................... 1.3 (3.2) (4.4)
------ ----- -----
Total deferred...................................... (2.8) (4.4) (2.0)
------ ----- -----
$ 34.7 $30.7 $13.5
====== ===== =====
</TABLE>
Domestic income before income taxes has been reduced by all of the
amortization of goodwill and deferred financing costs, and substantially all
interest expense.
The Company made income tax payments of $48.9 million, $29.0 million and
$16.3 million during 1995, 1994 and 1993, respectively. During the same period,
income tax refunds totaled $3.7 million, $1.2 million and $5.1 million,
respectively.
At December 31, 1995, the Company had cumulative undistributed earnings at
its foreign subsidiaries of $102.1 million. It is the Company's intention to
reinvest $38.5 million of these undistributed earnings of its foreign
subsidiaries and thereby indefinitely postpone their remittance. There has been
no provision made for taxes, nor is it practicable to estimate the amount of
taxes on the undistributed earnings which are reinvested indefinitely. The
remaining undistributed earnings of $63.6 million can be remitted without a
material charge to earnings.
Upon remittance of earnings, certain foreign countries impose withholding
taxes that are then available, subject to certain limitations, for use as
credits against the Company's U.S. tax liability. The amount of withholding tax
that would be payable upon remittance of the entire amount of undistributed
earnings would approximate $5.6 million.
F-19
<PAGE> 59
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
A reconciliation of federal statutory and effective income tax for the year
ended December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ----- -----
<S> <C> <C> <C>
Income before taxes........................................ $103.5 $78.5 $24.7
====== ===== =====
Statutory taxes at 35%..................................... $ 36.2 $27.5 $ 8.6
Amortization of excess purchase price.................... 5.1 5.1 4.8
State income taxes....................................... 2.7 1.8 1.0
Tax audit settlements.................................... (3.1) -- --
Foreign tax items........................................ (2.3) .4 .1
Percentage depletion..................................... (1.8) (1.6) (1.6)
Earnings reported net of taxes........................... (1.2) (.4) 1.1
Export benefits.......................................... (1.1) (1.0) (.8)
Other-net................................................ .2 (1.1) .3
------ ----- -----
Provision for income taxes................................. $ 34.7 $30.7 $13.5
====== ===== =====
Effective rate............................................. 33.5% 39.1% 54.7%
====== ===== =====
</TABLE>
A detailed summary of the current and noncurrent deferred tax assets and
(liabilities) in the Company's consolidated balance sheets at December 31
resulting from differences in the book and tax basis of assets and liabilities
follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
CURRENT
Inventories................................................... $(16.2) $(19.0)
Accrued expenses and reserves................................. 15.0 15.8
Employee benefits............................................. 2.0 1.8
Net operating loss carryforwards.............................. 2.8 2.6
Other......................................................... (2.3) (1.1)
------ ------
Total current net deferred tax asset..................... 1.3 0.1
------ ------
NON-CURRENT
Accrued expenses and reserves................................. 23.6 24.0
Employee benefits............................................. 16.3 13.3
Net operating loss carryforwards.............................. 2.6 3.3
Reserve for UMWA.............................................. 35.9 56.2
Depreciation & depletion...................................... (45.3) (45.7)
Unrepatriated earnings........................................ (11.7) (8.9)
Other......................................................... (11.8) (9.9)
------ ------
Total non-current net deferred tax asset................. 9.6 32.3
------ ------
Total net deferred tax asset............................. $ 10.9 $ 32.4
====== ======
</TABLE>
In 1995 the Company reached agreements with various tax authorities
resulting in non-recurring tax benefits of $3.1 million. Additionally, the
Company recognized a non-recurring tax benefit of $2.5 million from the
remittance of earnings of foreign subsidiaries subject to rates of tax in excess
of the statutory rate.
The Company and certain of its subsidiaries are currently under examination
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 future earnings.
F-20
<PAGE> 60
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 18 -- 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. Contributions to the various plans were $5.6 million in 1995, $6.9
million in 1994 and $5.2 million in 1993. Plan assets consist primarily of
publicly traded stocks, investment contracts and government and corporate bonds.
Set forth below is a detail of consolidated worldwide net periodic pension
expense and the assumptions used in accounting for the United States defined
benefit plans for the year ended December 31. The United Kingdom plans used
assumptions that are consistent with, but not identical to, those used by the
United States plans.
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost................................... $ 7.9 $ 6.6 $ 6.3
Interest cost on projected benefit
obligation................................... 10.4 9.4 9.0
Actual loss (gain) on plan assets.............. (21.2) 1.1 (8.2)
Curtailment gain............................... -- -- (.4)
Net amortization and deferral of actuarial
(gains) losses............................... 11.7 (9.5) .1
--------- --------- ---------
Net periodic pension expense................... $ 8.8 $ 7.6 $ 6.8
========= ========= =========
Assumptions:
Weighted average discount rates.............. 7.5% 8.5% 7.5%
Rate of increase in compensation levels...... 4.5-5.0% 5.0-5.5% 4.0-6.0%
Expected long-term rate of return on
assets.................................... 9.0% 9.0% 9.0%
</TABLE>
The following sets forth the funded status of the defined benefit plans and
amounts recognized in the consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
PARTIALLY FULLY
FUNDED PLANS FUNDED PLANS
----------------- ---------------
1995 1994 1995 1994
------ ------ ----- -----
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested accumulated benefit obligation............. $ 90.0 $ 66.9 $26.3 $23.0
Non-vested accumulated benefit obligation......... 5.8 4.6 1.7 .2
------ ------ ----- -----
Total accumulated benefit obligation.............. 95.8 71.5 28.0 23.2
Value of future salary projections................ 25.5 19.9 1.0 2.4
------ ------ ----- -----
Total projected benefit obligation................ 121.3 91.4 29.0 25.6
Fair value of plan assets......................... 91.7 71.8 33.3 29.4
------ ------ ----- -----
Plan assets in excess of (less than) projected
benefit obligation............................. (29.6) (19.6) 4.3 3.8
Amounts available to (reduce) increase future
pension expense:
Unamortized balance of the initial transition
amount.................................... (2.0) (2.5) .1 (.6)
Unamortized cumulative actuarial loss
(gain).................................... 4.1 (2.0) -- 1.6
Unamortized prior service cost............... 3.4 3.8 1.3 1.3
Adjustment for minimum pension liability.......... (8.8) (7.8) -- --
------ ------ ----- -----
Pension asset (liability) recognized in
consolidated balance sheet..................... $(32.9) $(28.1) $ 5.7 $ 6.1
====== ====== ===== =====
</TABLE>
F-21
<PAGE> 61
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DEFINED CONTRIBUTION PLANS
NACCO and its subsidiaries have defined contribution plans for
substantially all employees. For NACCO and certain subsidiaries, employee
contributions are matched by the Company based on plan provisions. In addition,
NACCO and certain other subsidiaries have profit sharing plans whereby the
subsidiary's contribution is determined annually based on its operating results.
Total contributions to these plans were $7.3 million in 1995, $5.9 million in
1994 and $5.5 million in 1993.
NOTE 19 -- BUSINESS SEGMENTS
NACCO's four operating subsidiaries function in distinct business
environments. Sales between subsidiaries, which are minimal, are eliminated in
consolidation. NACCO and Other includes the accounts of the parent company and
Bellaire. Information relating to the Company's operations at the subsidiary
level is presented below.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
REVENUES
NACCO Materials Handling Group............................. $1,510.1 $1,178.9 $ 908.2
Hamilton Beach/Proctor-Silex............................... 381.4 377.5 356.3
North American Coal........................................ 248.0 250.2 233.3
Kitchen Collection......................................... 69.6 63.9 53.7
NACCO and Other............................................ .5 .6 3.0
Eliminations............................................... (5.1) (6.2) (5.1)
-------- -------- --------
$2,204.5 $1,864.9 $1,549.4
======= ======= =======
AMORTIZATION OF GOODWILL
NACCO Materials Handling Group............................. $ 10.8 $ 10.8 $ 10.8
Hamilton Beach/Proctor-Silex............................... 2.8 2.8 2.9
Kitchen Collection......................................... .1 .1 .1
-------- -------- --------
$ 13.7 $ 13.7 $ 13.8
======= ======= =======
OPERATING PROFIT
NACCO Materials Handling Group............................. $ 85.8 $ 65.8 $ 39.6
Hamilton Beach/Proctor-Silex............................... 25.0 25.3 11.8
North American Coal........................................ 45.8 44.3 40.8
Kitchen Collection......................................... 3.3 5.4 4.8
NACCO and Other............................................ (8.8) (10.0) (8.0)
-------- -------- --------
$ 151.1 $ 130.8 $ 89.0
======= ======= =======
OPERATING PROFIT EXCLUDING GOODWILL AMORTIZATION
NACCO Materials Handling Group............................. $ 96.6 $ 76.6 $ 50.4
Hamilton Beach/Proctor-Silex............................... 27.8 28.1 14.7
North American Coal........................................ 45.8 44.3 40.8
Kitchen Collection......................................... 3.4 5.5 4.9
NACCO and Other............................................ (8.8) (10.0) (8.0)
-------- -------- --------
$ 164.8 $ 144.5 $ 102.8
======= ======= =======
INTEREST INCOME
NACCO Materials Handling Group............................. $ .9 $ .8 $ .8
North American Coal........................................ 2.4 3.0 2.1
NACCO and Other............................................ 1.9 1.1 1.9
Eliminations............................................... (3.3) (3.3) (2.9)
-------- -------- --------
$ 1.9 $ 1.6 $ 1.9
======= ======= =======
</TABLE>
F-22
<PAGE> 62
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
INTEREST EXPENSE
NACCO Materials Handling Group............................. $ (30.6) $ (33.7) $ (40.4)
Hamilton Beach/Proctor-Silex............................... (7.2) (7.5) (7.7)
North American Coal........................................ (1.3) (1.3) (.8)
Kitchen Collection......................................... (.5) (.3) (.1)
NACCO and Other............................................ (1.6) (2.3) (1.3)
Eliminations............................................... 3.3 3.3 2.9
-------- -------- --------
(37.9) (41.8) (47.4)
Project mining subsidiaries................................ (14.0) (14.3) (14.1)
-------- -------- --------
$ (51.9) $ (56.1) $ (61.5)
======= ======= =======
OTHER -- NET, INCOME (EXPENSE)
NACCO Materials Handling Group............................. $ 2.2 $ 2.9 $ (1.7)
Hamilton Beach/Proctor-Silex............................... (.8) (.3) (4.1)
North American Coal........................................ .5 (1.1) --
NACCO and Other............................................ .6 .7 1.1
-------- -------- --------
$ 2.5 $ 2.2 $ (4.7)
======= ======= =======
NET INCOME (LOSS)
Before Extraordinary Items
NACCO Materials Handling Group.......................... $ 36.9 $ 18.7 $ (5.1)
Hamilton Beach/Proctor-Silex............................ 11.8 10.2 (1.0)
North American Coal..................................... 22.6 21.0 17.4
Kitchen Collection...................................... 1.6 3.1 2.7
NACCO and Other......................................... (4.1) (5.3) (2.8)
Minority interest....................................... (3.3) (2.4) .4
-------- -------- --------
65.5 45.3 11.6
Extraordinary gain, net-of-tax.......................... 32.3 -- --
Extraordinary charges, net-of-tax....................... (3.4) (3.2) (3.3)
-------- -------- --------
$ 94.4 $ 42.1 $ 8.3
======= ======= =======
TOTAL ASSETS
NACCO Materials Handling Group............................. $1,052.2 $ 906.2 $ 833.0
Hamilton Beach/Proctor-Silex............................... 288.0 289.6 300.3
North American Coal........................................ 40.7 49.0 44.8
Kitchen Collection......................................... 25.1 26.0 23.3
NACCO and Other............................................ 62.7 92.6 88.3
-------- -------- --------
1,468.7 1,363.4 1,289.7
Project mining subsidiaries................................ 433.3 412.3 416.7
-------- -------- --------
1,902.0 1,775.7 1,706.4
Consolidating eliminations................................. (68.2) (81.4) (63.9)
-------- -------- --------
$1,833.8 $1,694.3 $1,642.5
======= ======= =======
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NACCO Materials Handling Group............................. $ 31.8 $ 32.2 $ 31.7
Hamilton Beach/Proctor-Silex............................... 15.8 15.5 15.3
North American Coal........................................ 1.7 1.6 1.5
Kitchen Collection......................................... 1.0 .9 .8
NACCO and Other............................................ .2 .1 .3
-------- -------- --------
50.5 50.3 49.6
Project mining subsidiaries................................ 28.8 29.9 28.5
-------- -------- --------
$ 79.3 $ 80.2 $ 78.1
======= ======= =======
</TABLE>
F-23
<PAGE> 63
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CAPITAL EXPENDITURES
NACCO Materials Handling Group............................. $ 39.4 $ 25.9 $ 20.2
Hamilton Beach/Proctor-Silex............................... 9.7 13.4 12.2
North American Coal........................................ 3.5 .4 1.0
Kitchen Collection......................................... 1.4 1.0 1.1
NACCO and Other............................................ .1 .2 .2
-------- -------- --------
54.1 40.9 34.7
Project mining subsidiaries................................ 19.0 11.7 23.0
-------- -------- --------
$ 73.1 $ 52.6 $ 57.7
======= ======= =======
</TABLE>
DATA BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
EUROPE,
AFRICA AND ASIA-
AMERICAS MIDDLE EAST PACIFIC ELIMINATIONS CONSOLIDATED
-------- ----------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1995
Sales to unaffiliated
customers...................... $1,691.8 $ 426.9 $ 85.8 $ -- $2,204.5
Transfer between geographic
areas.......................... 63.7 156.1 -- (219.8) --
-------- ----------- -------- ------------ ------------
Total revenues................... $1,755.5 $ 583.0 $ 85.8 $ (219.8) $2,204.5
======= ========= ======= ========= =========
Operating profit................. $ 116.0 $ 34.8 $ .3 $ -- $ 151.1
======= ========= ======= ========= =========
Total assets..................... $1,430.9 $ 374.4 $ 48.3 $ (19.8) $1,833.8
======= ========= ======= ========= =========
1994
Sales to unaffiliated
customers...................... $1,509.4 $ 294.4 $ 61.1 $ -- $1,864.9
Transfer between geographic
areas.......................... 49.2 130.6 -- (179.8) --
-------- ----------- -------- ------------ ------------
Total revenues................... $1,558.6 $ 425.0 $ 61.1 $ (179.8) $1,864.9
======= ========= ======= ========= =========
Operating profit................. $ 110.2 $ 15.4 $ 5.2 $ -- $ 130.8
======= ========= ======= ========= =========
Total assets..................... $1,371.1 $ 309.6 $ 24.0 $ (10.4) $1,694.3
======= ========= ======= ========= =========
1993
Sales to unaffiliated
customers...................... $1,284.8 $ 222.2 $ 42.4 $ -- $1,549.4
Transfer between geographic
areas.......................... 31.5 81.2 -- (112.7) --
-------- ----------- -------- ------------ ------------
Total revenues................... $1,316.3 $ 303.4 $ 42.4 $ (112.7) $1,549.4
======= ========= ======= ========= =========
Operating profit................. $ 89.7 $ (2.4) $ 1.7 $ -- $ 89.0
======= ========= ======= ========= =========
Total assets..................... $1,381.5 $ 274.8 $ 19.6 $ (33.4) $1,642.5
======= ========= ======= ========= =========
</TABLE>
NACCO parent company expense reduced Americas operating profit by $8.7
million, $9.9 million and $7.9 million in 1995, 1994 and 1993, respectively. The
Asia-Pacific category above does not include the operating results or assets of
NMHG's 50-percent-owned Japanese joint venture, Sumitomo-NACCO, which is
accounted for using the equity method.
F-24
<PAGE> 64
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results of operations for the year
ended December 31 is as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995
TOTAL REVENUES
NACCO Materials Handling Group............. $ 363.2 $ 370.2 $ 349.2 $ 427.5
Hamilton Beach/Proctor-Silex............... 67.0 79.7 110.3 124.4
North American Coal........................ 60.5 55.3 62.5 69.7
Kitchen Collection......................... 12.2 13.5 18.1 25.8
NACCO and Other............................ -- .3 -- .2
Eliminations............................... (.5) (1.4) (1.8) (1.4)
------- ------- ------- -------
502.4 517.6 538.3 646.2
------- ------- ------- -------
GROSS PROFIT.................................. 100.8 99.7 101.3 123.9
------- ------- ------- -------
OPERATING PROFIT
NACCO Materials Handling Group............. 23.7 21.9 15.3 24.9
Hamilton Beach/Proctor-Silex............... 1.4 3.6 9.5 10.5
North American Coal........................ 11.7 9.2 10.8 14.1
Kitchen Collection......................... (.5) (.4) .9 3.3
NACCO and Other............................ (2.0) (2.1) (2.1) (2.6)
------- ------- ------- -------
34.3 32.2 34.4 50.2
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEMS............. 12.8 14.7 13.7 24.3
Extraordinary gain, net-of-tax............. -- -- -- 32.3
Extraordinary charges, net-of-tax.......... (1.3) -- (2.1) --
------- ------- ------- -------
NET INCOME.................................... $ 11.5 $ 14.7 $ 11.6 $ 56.6
====== ====== ====== ======
PER SHARE AMOUNTS:
INCOME BEFORE EXTRAORDINARY ITEMS............. $ 1.43 $ 1.64 $ 1.53 $ 2.71
Extraordinary gain, net-of-tax............. -- -- -- 3.61
Extraordinary charges, net-of-tax.......... (.14) -- (.24) --
------- ------- ------- -------
NET INCOME.................................... $ 1.29 $ 1.64 $ 1.29 $ 6.32
====== ====== ====== ======
</TABLE>
F-25
<PAGE> 65
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1994
TOTAL REVENUES
NACCO Materials Handling Group............. $ 245.3 $ 290.4 $ 289.7 $ 353.5
Hamilton Beach/Proctor-Silex............... 68.6 76.1 106.9 125.9
North American Coal........................ 59.3 58.8 68.3 63.8
Kitchen Collection......................... 10.7 12.4 17.2 23.6
NACCO and Other............................ .1 .2 .2 .1
Eliminations............................... (.8) (1.0) (2.0) (2.4)
------- ------- ------- -------
383.2 436.9 480.3 564.5
------- ------- ------- -------
GROSS PROFIT.................................. 77.8 88.7 96.1 110.5
------- ------- ------- -------
OPERATING PROFIT
NACCO Materials Handling Group............. 11.1 19.8 14.5 20.4
Hamilton Beach/Proctor-Silex............... (.4) 3.5 9.6 12.6
North American Coal........................ 12.0 9.5 11.0 11.8
Kitchen Collection......................... (.2) .2 1.6 3.8
NACCO and Other............................ (2.2) (2.3) (2.5) (3.0)
------- ------- ------- -------
20.3 30.7 34.2 45.6
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY CHARGE............ 2.8 9.2 11.0 22.3
Extraordinary charge, net-of-tax........... -- (3.2) -- --
------- ------- ------- -------
NET INCOME.................................... $ 2.8 $ 6.0 $ 11.0 $ 22.3
====== ====== ====== ======
PER SHARE AMOUNTS:
INCOME BEFORE EXTRAORDINARY CHARGE............ $ .31 $ 1.03 $ 1.23 $ 2.49
Extraordinary charge, net-of-tax........... -- (.36) -- --
------- ------- ------- -------
NET INCOME.................................... $ .31 $ .67 $ 1.23 $ 2.49
====== ====== ====== ======
</TABLE>
NOTE 21 -- PARENT COMPANY CONDENSED BALANCE SHEETS
The condensed balance sheets of NACCO, the parent company, at December 31
are as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
ASSETS
Current assets................................................... $ .1 $ .2
Current intercompany accounts receivable, net.................... 11.0 12.8
Other assets..................................................... 1.6 1.8
Investment in subsidiaries
NACCO Materials Handling Group................................ 330.3 300.7
Hamilton Beach/Proctor-Silex.................................. 114.2 104.7
North American Coal........................................... 15.1 15.1
Kitchen Collection............................................ 11.8 10.1
Bellaire...................................................... .9 (101.3)
------ ------
472.3 329.3
Property, plant and equipment, net............................... 1.1 1.2
Deferred income taxes............................................ 22.2 1.7
------ ------
Total Assets.................................................. $508.3 $347.0
====== ======
</TABLE>
F-26
<PAGE> 66
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
LIABILITIES AND EQUITY
Current liabilities.............................................. $ 9.9 $ 18.9
Reserve for future interest on UMWA obligation................... 64.2 --
Note payable to Bellaire......................................... 43.3 19.2
Notes payable to other subsidiaries.............................. 16.9 25.9
Deferred income and other........................................ 3.9 3.6
Stockholders' equity............................................. 370.1 279.4
------ ------
Total Liabilities and Stockholders' Equity.................... $508.3 $347.0
====== ======
</TABLE>
The credit agreements at NMHG, HB/PS and KCI allow the transfer of assets
to NACCO under certain circumstances. The amount of NACCO's investment in NMHG,
HB/PS and KCI that was restricted at December 31, 1995, totals approximately
$418.2 million. There are no restrictions on the transfer of assets from North
American Coal, and its dividends and advances are the primary source of cash for
NACCO.
F-27
<PAGE> 67
NACCO INDUSTRIES, INC. REPORT OF MANAGEMENT
TO THE STOCKHOLDERS OF NACCO INDUSTRIES, INC.:
The management of NACCO Industries, Inc. is responsible for the
preparation, content and integrity of the financial statements and related
information contained within this report. The accompanying financial statements
have been prepared in accordance with generally accepted accounting principles
and include amounts that are based on informed judgments and estimates.
The Company's code of conduct, communicated throughout the organization,
requires adherence to high ethical standards in the conduct of the Company's
business.
NACCO Industries, Inc. and each of its subsidiaries maintains 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 generally accepted auditing standards and provide
an objective and independent assessment that helps ensure fair presentation of
the Company's operating results and financial position. The independent
accountants have access to all financial records and related data of the
Company, as well as to the minutes of stockholders' and directors' meetings.
The Audit Committee of the Board of Directors, composed of independent
directors, meets regularly with the independent auditors and internal auditors
to review the scope of their audit reports and to discuss any action to be
taken. The independent auditors and the internal auditors have free and direct
access to the Audit Committee. The Audit Committee also reviews the financial
reporting process and accounting policies of NACCO Industries Inc. and each of
its subsidiaries.
<TABLE>
<S> <C> <C>
Alfred M. Rankin, Jr. Frank B. O'Brien Steven M. Billick
- ------------------------------ ------------------------------ ------------------------------
Alfred M. Rankin, Jr. Frank B. O'Brien Steven M. Billick
Chairman, President Senior Vice President -- Vice President and Controller
and Chief Executive Officer Corporate Development
and Chief Financial Officer
</TABLE>
F-28
<PAGE> 68
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current assets........................................................ $ 99 $ 279
Net amounts receivable from subsidiaries.............................. 11,035 12,755
Other assets.......................................................... 1,595 1,753
Investment in subsidiaries
NMHG................................................................ 330,274 300,672
HB/PS............................................................... 114,239 104,694
NACoal.............................................................. 15,125 15,125
KCI................................................................. 11,768 10,141
Bellaire............................................................ 900 (101,329)
-------- ---------
472,306 329,303
Property, plant and equipment, net.................................... 1,062 1,198
Deferred income taxes................................................. 22,241 1,699
-------- ---------
Total Assets................................................ $508,338 $ 346,987
======== =========
Current liabilities................................................... $ 9,946 $ 18,942
Reserve for future interest on UWMA obligation........................ 64,248 --
Note payable to Bellaire.............................................. 43,259 19,227
Notes payable to other subsidiaries................................... 16,889 25,834
Deferred income and other............................................. 3,869 3,593
Stockholders' equity.................................................. 370,127 279,391
-------- ---------
Total Liabilities and Stockholders' Equity.................. $508,338 $ 346,987
======== =========
</TABLE>
See notes to parent company financial statements.
F-29
<PAGE> 69
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (expense):
Intercompany interest income................................ $ 198 $ 1,068 $ 1,841
Intercompany interest expense............................... (2,670) (3,510) (2,101)
Other -- net................................................ 2,090 464 829
------- ------- -------
(382) (1,978) 569
Administrative and general expenses........................... 8,713 9,903 7,831
------- ------- -------
Loss before income taxes.................................... (9,095) (11,881) (7,262)
Income tax benefit............................................ (4,502) (5,825) (1,748)
------- ------- -------
Net loss before equity in earnings of subsidiaries and
extraordinary items......................................... (4,593) (6,056) (5,514)
Equity in earnings of subsidiaries before extraordinary
items....................................................... 70,099 51,328 17,107
Extraordinary gain, net-of-tax................................ 32,333 -- --
Extraordinary charge, net-of-tax.............................. (3,399) (3,218) (3,292)
------- ------- -------
Net income.......................................... $94,440 $42,054 $ 8,301
======= ======= =======
</TABLE>
See notes to parent company financial statements.
F-30
<PAGE> 70
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net income............................................... $ 94,440 $ 42,054 $ 8,301
Equity in earnings of subsidiaries....................... (70,099) (51,328) (17,107)
Extraordinary gain, net-of-tax........................... (32,333) -- --
Extraordinary charge, net-of-tax......................... 3,399 3,218 3,292
-------- -------- --------
Parent company only net loss............................. (4,593) (6,056) (5,514)
Deferred income taxes.................................... (23,603) (4,866) 6,908
Income taxes net of intercompany tax payments............ (7,120) (3,442) (3,954)
Working capital changes.................................. 1,145 983 775
Changes in current intercompany amounts.................. 2,268 69 49
Change in reserve for future interest on UMWA
obligation............................................ 64,486 -- --
Items of income or expense not requiring cash outlays.... 491 (577) 299
-------- -------- --------
Net cash provided (used) by operating
activities..................................... 33,074 (13,889) (1,437)
-------- -------- --------
Investing Activities
Capital contributions to subsidiaries
NMHG.................................................. -- (24,273) (52,235)
Bellaire.............................................. (69,326) -- --
Dividends and advances received from subsidiaries........ 10,270 40,009 45,883
Note payable to Bellaire................................. 27,410 -- --
Purchases of Hyster-Yale 12 3/8% debentures.............. -- -- (11,832)
Reduction of investment in Hyster-Yale 12 3/8%
debentures............................................ 4,394 3,946 25,529
Expenditures for equipment............................... (79) (85) (147)
-------- -------- --------
Net cash provided (used) by operating
activities..................................... (27,331) 19,597 7,198
-------- -------- --------
Financing Activities
Cash dividends........................................... (6,365) (6,040) (5,854)
Treasury stock sales under stock option and directors'
compensation plans -- net............................. 817 251 212
Other -- net............................................. (194) 38 (75)
-------- -------- --------
Net cash used by financing activities............ (5,742) (5,751) (5,717)
-------- -------- --------
Cash and cash equivalents
Increase (decrease) for the period....................... 1 (43) 44
Balance at the beginning of the period................... 4 47 3
-------- -------- --------
Balance at the end of the period................. $ 5 $ 4 $ 47
======== ======== ========
</TABLE>
See notes to parent company financial statements.
F-31
<PAGE> 71
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, 1995, 1994, AND 1993
The notes to consolidated financial statements, included elsewhere in this
Form 10-K, are hereby incorporated by reference into these notes to parent
company financial statements.
NOTE A -- LONG-TERM OBLIGATIONS AND GUARANTEES
NACCO Industries, Inc. ("NACCO" the parent company) is a holding company
which owns four operating subsidiaries. It is NACCO's policy not to guarantee
the debt of such subsidiaries.
NOTE B -- CASH DIVIDENDS AND ADVANCES TO NACCO
Dividends received from the subsidiaries were $22.6, $62.7, and $23.3
million in 1995, 1994, and 1993, respectively.
NOTE C -- CAPITAL CONTRIBUTIONS TO SUBSIDIARIES
The 1995 capital contribution to Bellaire of $69.3 million includes a note
payable of $27.4 million and the assumption of a reserve for future interest on
UMWA obligation, net of deferred taxes, of $41.9 million.
The 1993 capital contribution to NMHG of $52.2 million includes the $26.7
million of cash contributed by NACCO to NMHG in 1993. In addition, NACCO
contributed previously purchased Hyster-Yale 12 3/8% debentures with a cost to
NACCO of $25.5 million (face value of $23.7 million) to NMHG in 1993.
NOTE D -- UNRESTRICTED CASH
The amount of unrestricted cash available to NACCO, included in Investment
in subsidiaries, was $30.1 million at December 31, 1995.
F-32
<PAGE> 72
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL A. COL B. COL C. COL D. COL E.
- ----------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------- (D)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ACCOUNTS DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSES --DESCRIBE --DESCRIBE PERIOD
- ----------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts................. $4,472 $ 1,583 $148(C) $ 1,764(A) $4,439
Allowance for discounts,
adjustments and
returns.................. $6,168 $ 17,328 $ 16,618(B) $6,878
1994
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts................. $5,731 $ 1,240 $ 39(C) $ 2,538(A) $4,472
Allowance for discounts,
adjustments and
returns.................. $5,397 $ 17,878 $ 17,107(B) $6,168
1993
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts................. $5,302 $ 1,056 $ 595(A)
$ 32(C) $5,731
Allowance for discounts,
adjustments and
returns.................. $7,097 $ 16,596 $ 18,296(B) $5,397
</TABLE>
Note A -- Accounts receivable balances written off, net of recoveries.
Note B -- Payments.
Note C -- Subsidiary's foreign currency translation adjustments and other.
Note D -- Balances which are not required to be presented and those which are
immaterial have been omitted.
F-33
<PAGE> 73
EXHIBIT 11
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
INCOME:
Income before extraordinary items........................... $65,506 $45,272 $11,593
Extraordinary gain, net-of-tax.............................. 32,333 -- --
Extraordinary charges, net-of-tax........................... (3,399) (3,218) (3,292)
------- ------- -------
Net income.................................................. $94,440 $42,054 $ 8,301
======= ======= =======
PER SHARE AMOUNTS REPORTED TO STOCKHOLDERS -- Note 1
Income before extraordinary items........................... $ 7.31 $ 5.06 $ 1.30
Extraordinary gain, net-of-tax.............................. 3.61 -- --
Extraordinary charges, net-of-tax........................... (.38) (.36) (.37)
------- ------- -------
Net income.................................................. $ 10.54 $ 4.70 $ .93
======= ======= =======
PRIMARY:
Weighted average shares outstanding......................... 8,963 8,948 8,938
Dilutive stock options -- Note 2............................ 12 12 15
------- ------- -------
Totals................................................... 8,975 8,960 8,953
======= ======= =======
Per share amounts
Income before extraordinary items........................ $ 7.30 $ 5.05 $ 1.30
Extraordinary gain, net-of-tax........................... 3.60 -- --
Extraordinary charges, net-of-tax........................ (.38) (.35) (.37)
------- ------- -------
Net income............................................... $ 10.52 $ 4.70 $ .93
======= ======= =======
FULLY DILUTED:
Weighted average shares outstanding......................... 8,963 8,948 8,938
Dilutive stock options -- Note 2............................ 12 9 17
------- ------- -------
Totals................................................... 8,975 8,957 8,955
======= ======= =======
Per share amounts
Income before extraordinary items........................ $ 7.30 $ 5.05 $ 1.30
Extraordinary gain, net-of-tax........................... 3.60 -- --
Extraordinary charges, net-of-tax........................ (.38) (.35) (.37)
------- ------- -------
Net income............................................... $ 10.52 $ 4.70 $ .93
======= ======= =======
</TABLE>
NOTE 1 -- Per share earnings have been computed and reported to the stockholders
pursuant to APB Opinion No. 15, which provides that "any reduction of
less than 3% in the aggregate need not be considered as dilution in
the computation and presentation of earnings per share data."
NOTE 2 -- Dilutive stock options are calculated based on the treasury stock
method. For primary per share earnings the average market price is
used. For fully diluted per share earnings the year-end market price,
if higher than the average market price, is used.
<PAGE> 1
Exhibit 10(xiii)
================================================================================
NACCO INDUSTRIES, INC.
1996 ANNUAL INCENTIVE COMPENSATION PLAN
================================================================================
1. PURPOSE OF THE PLAN
The purpose of the NACCO Industries, Inc. 1996 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, 1996 through
December 31, 1996.
(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 the Plan. Employees of the
Company's subsidiaries shall not be eligible to participate in
<PAGE> 2
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:
2
<PAGE> 3
(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 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
3
<PAGE> 4
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.
(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, 1996.
4
<PAGE> 5
Exhibit 10(xiv)
================================================================================
NACCO INDUSTRIES, INC.
SUPPLEMENTAL ANNUAL INCENTIVE COMPENSATION PLAN
================================================================================
1. PURPOSE OF THE PLAN
The purpose of the NACCO Industries, Inc. Supplemental 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 the opportunity to earn 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 this Plan for
any year in an amount determined in a manner not inconsistent with the terms
hereof.
(b) "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.
(c) "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.
Employees of the Company's subsidiaries shall not be eligible to participate in
this Plan.
(d) "Section 162(m)" means Section 162(m) of the Internal Revenue
Code of 1986, as amended, or any successor provision.
(e) "Target Award" means a dollar amount equal to the amount of
cash to be paid to a Participant under the Plan assuming that all performance
targets are met. The Target Award, together with the target amounts for the
Participant under the Company's other incentive compensation plans, shall be in
an amount which is competitive with similar target awards at other similarly
situated companies.
<PAGE> 6
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 Target Award
or Award 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; provided, however,
that no such action may be taken by the Committee which would cause any amount
to be paid to a Participant who is, or is determined by the Committee to be
likely to become, a "covered employee" to be includable as "applicable employee
remuneration" of such Participant, as such terms are defined in Section 162(m).
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. ELIGIBILITY
Each Participant, including directors of the Company who are also
salaried employees of the Company, shall be eligible to participate in this
Plan and receive Awards in accordance with Section 5.
5. AWARDS
The Committee may, from time to time and upon such conditions as it may
determine, authorize the payment 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 90th day of each calendar year, the
Committee shall approve (i) a Target Award to be granted to each Participant
and (ii) one or more performance targets and formulas for determining the
amount of each Award. Performance targets shall be based upon the return on
equity, return on tangible assets employed, net income, market share, sales
development or support costs of the
2
<PAGE> 7
Company and/or its subsidiaries; provided, however, that performance targets
which are used in the Plan shall not be used in the Company's Annual Incentive
Compensation Plan in the same year.
(b) Not later than the 90th day of the following calendar year,
the Committee shall approve:
(i) a preliminary calculation of the amount of each Award
based upon the application of the formulas 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
paid to each Participant for the prior year, which amount shall be not greater
than the amount determined in accordance with Section 5(b)(i). 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, that 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.
(c) Promptly following the determination of Awards for the
Participants pursuant to Section 5(b)(ii), the Company shall pay the amount of
such Awards to the Participants in cash, subject to all withholdings and
deductions pursuant to Section 6.
(d) No Award may be paid for any year to a Participant in excess of
$800,000.
6. 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.
7. 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; and further provided, however, that no amendment may be made which
would cause any amount paid to a Participant who is, or is determined by the
Committee to be
3
<PAGE> 8
likely to become, a "covered employee" to be includable as "applicable employee
remuneration" of such Participant, as such terms are defined in Section 162(m).
8. 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.
(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.
9. APPROVAL BY STOCKHOLDERS
The Plan shall be submitted for approval by the stockholders of the
Company. If such approval has not been obtained by June 1, 1996, this Plan
shall be nullified and all grants of Target Awards shall be rescinded.
10. EFFECTIVE DATE
Subject to its approval by the stockholders of the Company, this Plan
shall become effective as of January 1, 1996.
4
<PAGE> 9
Exhibit 10(xv)
================================================================================
NACCO INDUSTRIES, INC.
EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN
(Amended and Restated as of January 1, 1996)
================================================================================
1. PURPOSE OF THE PLAN
The purpose of this Executive Long-Term Incentive Compensation Plan
(the "Plan") is to further the long-term profits and growth of NACCO
Industries, Inc. (the "Company") by enabling the Company to attract and retain
key executive employees of the Company by offering the opportunity to earn
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
encourage enhancement of the Company's stockholder value.
2. DEFINITIONS
(a) "Average Award Share Price" means the average of the closing
price per share of Class A Common Stock on the New York Stock Exchange on the
Friday (or if Friday is not a trading day, the last trading day before such
Friday) for each week of the relevant period.
(b) "Award" means an award paid to a Participant under this Plan
for any period of one or more years in an amount determined pursuant to a
formula which is established by the Committee not later than the 90th calendar
day of the performance period on which the Award is based. The Committee shall
allocate the amount of an Award between the cash component, to be paid in cash,
and the equity component, to be paid in Award Shares.
(c) "Award Shares" means shares of Class A Common Stock which are
issued pursuant to, and with such restrictions as are imposed by, the terms of
this Plan. Such shares may be shares of original issuance or treasury shares
or a combination of the foregoing.
(d) "Class A Common Stock" means the Company's Class A Common
Stock, par value $1.00 per share.
(e) "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 (i) is not
an employee
<PAGE> 10
of the Company or any of its subsidiaries and (ii) is a "disinterested person"
within the meaning of Rule 16b-3.
(f) "Participant" means any salaried employee of the Company who
in the judgment of the Committee occupies a key executive position in which his
efforts may significantly contribute to the profits or growth of the Company.
Employees of the Company's subsidiaries shall not be eligible to participate in
this Plan.
(g) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (or any successor rule to the same effect), as in effect
from time to time.
(h) "Section 162(m)" means Section 162(m) of the Internal Revenue
Code of 1986, as amended, or any successor provision.
(i) "Target Award" means a dollar amount equal to 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 Target Award
or 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 this Plan;
provided, however, that no such action may be taken by the Committee which
would cause any Awards to be made to a Participant who is, or is determined by
the Committee to be likely to become, a "covered employee" to be includable as
"applicable employee remuneration" of such Participant, as such terms are
defined in Section 162(m). 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. ELIGIBILITY
Each Participant, including directors of the Company who are also
salaried employees of the Company, shall be eligible to participate in this
Plan and receive Awards in accordance with Section 5.
2
<PAGE> 11
5. AWARDS
The Committee may, from time to time and upon such conditions as it may
determine, authorize the payment 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 90th day of each performance period, the
Committee shall approve (i) a Target Award to be granted to each Participant
and (ii) a formula for determining the amount of each Award, which formula is
based upon the Company's average return on equity for years covered by the
performance period. Each grant shall specify the allocation between the cash
portion of the Award and the equity portion of the Award.
(b) Not later than the 90th day following the end of each
performance period, 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 paid to
each Participant for the prior year, which amount shall be not greater than
the amount determined in accordance with Section 5(b)(i). 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,
that 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.
(c) Each Award shall be paid partly in cash and partly in Award
Shares. The number of Award Shares to be issued to a Participant shall be based
upon the number of shares of Class A Common Stock which can be purchased with
the equity portion of the Award at the Average Award Share Price. Awards shall
be paid subject to all withholdings and deductions pursuant to Section 6.
Notwithstanding any other provision of the Plan, the maximum amount paid to a
Participant in a single calendar year as a result of Awards under this Plan
shall not exceed $2,250,000.
(d) Award Shares shall entitle such Participant to voting,
dividend and other ownership rights. Each Award shall provide that the
transferability of the Award Shares shall be prohibited or restricted in the
manner and to the extent prescribed by the Committee at the date of payment for
a period of ten years, or such other shorter or longer period as may be
determined by the Committee from time to time.
3
<PAGE> 12
(e) Each payment of Award Shares shall be evidenced by an
agreement executed on behalf of the Company by an executive officer and
delivered to and accepted by such Participant; each such agreement shall
contain such terms and provisions, consistent with this Plan, as the Committee
may approve, including, without limitation, prohibitions and restrictions
regarding the transferability of Award Shares (other than a transfer (i) by
will or the laws of descent and distribution, (ii) pursuant to a domestic
relations order meeting the definition of a qualified domestic relations order
under Section 206(d)(3)(B) of the Employee Retirement Income Security Act of
1974, as amended, or (iii) to a trust for the benefit of a Participant or his
spouse, children or grandchildren, provided that Award Shares transferred to
such a trust shall continue to be Award Shares subject to this Plan).
(f) Multiple Awards may be granted to a Participant; provided,
however, that no two Awards to a Participant may have identical performance
periods.
6. WITHHOLDING TAXES
To the extent that the Company is required to withhold federal, state
or local taxes in connection with any Award paid to a Participant under this
Plan, and the amounts available to the Company for such withholding are
insufficient, it shall be a condition to the receipt of such Award that the
Participant make arrangements satisfactory to the Company for the payment of
the balance of such taxes required to be withheld, which arrangements (in the
discretion of the Committee) may include relinquishment of a portion of such
Award. The Company and a Participant may also make similar arrangements with
respect to the payment of any other taxes derived from or related to the Award
with respect to which withholding is not required.
7. AMENDMENT, TERMINATION AND ADJUSTMENTS
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
or any Award Shares of such Participant; and further provided, however, that,
without further approval by the stockholders of the Company, no such action
shall (i) increase the maximum number of Award Shares to be issued under this
Plan specified in Section 8 (except that adjustments and additions expressly
authorized by this Section 7 shall not be limited by this clause (i), (ii)
cause Rule 16b-3 to become inapplicable to this Plan or (iii) cause any amount
of an Award to a Participant who is, or is determined by the Committee to be
likely to become, a "covered employee" to be includable as "applicable employee
remuneration" of such Participant, as such terms are defined in Section 162(m).
The Committee may make or provide for such adjustment in the total number of
Award Shares to be issued under this Plan specified in Section 8 as the
Committee in its sole discretion,
4
<PAGE> 13
exercised in good faith, may determine is equitably required to reflect (a) any
stock dividend, stock split, combination of shares, recapitalization or any
other change in the capital structure of the Company, (b) 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 (c) any other corporate transaction or
event having an effect similar to any of the foregoing. All Target Awards and
Awards granted prior to any termination of this Plan shall continue to be
subject to the terms of this Plan. In the case of termination of employment by
reason of death, permanent disability or retirement pursuant to the terms of
the qualified pension plan applicable to the Participant, or in the case of
other special circumstances, of a Participant who holds Award Shares as to
which the prohibition or restriction on transfer has not lapsed, or in case of
a termination of the Plan pursuant to this Section 7, the Committee may, in its
sole discretion, accelerate the time at which such prohibition or restriction
on transfer will lapse.
8. AWARD SHARES SUBJECT TO PLAN
Subject to adjustment as provided in this Plan, the total number of
shares of Class A Common Stock which may be issued as Award Shares under this
Plan shall be 300,000.
9. APPROVAL BY STOCKHOLDERS
The Plan shall be submitted for approval by the stockholders of the
Company. If such approval has not been obtained by June 1, 1996, this Plan
shall be nullified and all grants of Target Awards shall be rescinded.
10. 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.
(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
5
<PAGE> 14
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.
11. EFFECTIVE DATE
Subject to its approval by the stockholders of the Company, this Plan
shall become effective as of January 1, 1996.
6
<PAGE> 15
Exhibit 10(xxxi)
THE NORTH AMERICAN COAL CORPORATION
1996 INCENTIVE COMPENSATION PLAN
SUMMARY
The Incentive Compensation Plan (Plan) offers a strongly competitive
opportunity to senior mangers 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 target, stated as a
percentage of salary midpoint, that establishes the incentive
amount they will receive when performance objectives are met.
* The individual target amount is allocated among the following
performance components:
Intentionally Omitted
* 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 levels of
results, from threshold to maximum, is created around each
performance objective.
* A payout is defined which provides for incentive payments up
to 150 percent of the incentive target, except to the extent
the Committee elects to increase the actual pool by up to 10%,
as described below.
* A performance/payout schedule combines the two ranges into a
matrix that defines the level of payout that will result from
each level of performance.
* After audited financials are available, awards will be
calculated based an actual results against the established
objectives.
* A final individual performance adjustment may be made,
within a range of plus minus 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
potential that NAC's executives will work with for a year. At year-end, the
structure channels judgment of the managements team's performance along
predetermined lines that should convey a sense of fairness in the determination
of rewards.
<PAGE> 16
PLAN STRUCTURE
INDIVIDUAL INCENTIVE TARGETS
The fundamental building block of the proposed Plan structure is the
individual incentive target. Each participant is assigned a target, stated as
a percentage 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
Intentionally Omitted.
INCENTIVE AWARD RANGE
Actual performance results attained probably will not be exactly to
the established performance goals. Therefore, the Plan is designed to provide
payouts ranging 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:
<TABLE>
<CAPTION>
% of
Award Level Target Description
----------- ------ -----------
<S> <C> <C>
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.
</TABLE>
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 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 Omitted.
<PAGE> 17
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 payment will be
established around 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 as clearly as possible.
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 in line with the definitions.
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 payout and performance ranges yields a
performance/payout schedule as in the following example:
Performance Definition Results Levels Payout
----------- ---------- ------- ------ ------
Threshold Just bonusable 75% Threshold 50%
Objective On plan 100% Target 100%
Maximum Heavy stretch 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 awards will be earned under the Plan in any year unless
the threshold level under the corporate performance component is achieved.
Once the corporate performance
<PAGE> 18
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 managements'
perceptions of each individual's overall performance.
PARTIAL AWARDS
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 pro
ratio 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 there would normally be no payments due to
corporate performance which is below the criteria established for the year.
<PAGE> 19
EXHIBIT 10(xxxix)
AGREEMENT NO. 2
TO CREDIT AGREEMENT
Amendment, dated as of September __, 1995 to the Credit Agreement
dated as of September 27, 1991, as may be amended from time to time (the
"Agreement") between The North American Coal Corporation (the "Borrower"), the
Banks listed therein and Morgan Guaranty Trust Company of New York, as Agent
(the "Agent").
The parties hereto desire to amend the Agreement subject to the terms
and condition of the Amendment, as hereinafter provided. Accordingly, the
parties hereto agree as follows:
1. DEFINITIONS. Except as otherwise defined herein, capitalized
terms used herein have the respective meanings assigned to them in the
Agreement.
2. AMENDMENTS:
a. CHANGE TO DEFINITIONS OF TERMINATION DATE.
The definition of "Termination Date" in Section 1.01 of the Agreement
is hereby amended by deleting the date "September 27, 1997" and inserting in
its place the date "September 27, 2000".
b. CHANGE TO COMMITMENT FEE.
The first sentence of Section 2.06(a) of the Agreement is hereby
amended by deleting the number ".0625%" and inserting in its place the number
".0125%".
3. REPRESENTATIONS. The Borrower hereby confirms and repeats
each of the representations and warranties set forth in the Agreement on and as
of the date of this Amendment as if made on and as of such date and as if each
reference therein to the Agreement referred to the Agreement as modified
hereby, and represents and warrants that no Event of Default or other event
which, with the giving of notice or the lapse of time, or both, would
constitute such an Event of Default has occurred and is continuing.
4. AGREEMENT AS AMENDED. Except as expressly amended hereby, the
Agreement shall continue in full force and effect in accordance with the terms
thereof.
5. GOVERNING LAW. This Amendment, and the Agreement as amended
hereby, shall be construed in accordance with and governed by the laws of the
State of New York.
6. SEVERABILITY. In case any one or more of the provisions
contained in the Amendment would be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
7. COUNTERPARTS: EFFECTIVE DATE. This Amendment may be executed
in any number of counterparts, each of which shall constitute an original but
all of which when taken together shall constitute one and the same instrument.
The Amendment shall become effective as of the
<PAGE> 20
date first above written upon receipt by the Bank of counterparts hereof
executed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have cause this Amendment to be executed
by their duly authorized officers as of the day and year first above written.
THE NORTH AMERICAN COAL CORPORATION
By Charles B. Friley
---------------------------------------
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Agent
By Timothy S. Broadbent
---------------------------------------
Title: Vice President
CITIBANK, N.A.
By Carolyn R. Bodmer
---------------------------------------
Title: Vice President
FIRST INTERSTATE BANK OF TEXAS
By Ken Taylor
---------------------------------------
Title: Assistant Vice President
SOCIETY NATIONAL BANK
By Marianne Meal
---------------------------------------
Title: Assistant Vice President
<PAGE> 21
Exhibit 10 (xli)
THE NORTH AMERICAN COAL CORPORATION
DEFERRED COMPENSATION PLAN FOR MANAGEMENT EMPLOYEES
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996)
<PAGE> 22
THE NORTH AMERICAN COAL CORPORATION
DEFERRED COMPENSATION PLAN FOR MANAGEMENT EMPLOYEES
The North American Coal Corporation (the "Company") does hereby
adopt this amendment and restatement of The North American Coal Corporation
Deferred Compensation Plan for Management Employees, effective January 1, 1996.
ARTICLE I
PREFACE
SECTION 1.1. Effective Date. The effective date of this
restatement of the Plan is January 1, 1996.
SECTION 1.2. Purpose of the Plan. The purpose of this Plan is
to provide for certain Employees of the Company (and its subsidiaries) benefits
they would have received under the Savings Plan but for the limitations imposed
under Sections 402(g), 401(a)(17), 401(k)(3), 401(m) and 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
Savings Plan 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 in
accordance with Section 3.3 by the Employer as the sum of the Participant's
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:
<PAGE> 23
2
(i) "Net Income (before extraordinary items)" is defined as
consolidated net income, as defined by general accepted accounting principles
("GAAP"), for NACCO Industries, Inc. 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 NACCO
Industries, Inc. and its subsidiaries for the subject year;
(iii) "Weighted Average Stockholders' Equity" is calculated by
adding the consolidated stockholders' equity for NACCO Industries, Inc., 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
NACCO Industries, Inc. 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
NACCO Industries, Inc.
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. Company shall mean The North American Coal
Corporation.
<PAGE> 24
3
SECTION 2.5. Employer shall mean the Company and any other
Controlled Group Member that adopts this Plan pursuant to Section 8.7.
SECTION 2.6. Excess Retirement Benefit shall mean an Excess
401(k) Benefit or an 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 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 2.8. 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 pending voluntary or involuntary
proceeding as a debtor under the United States Bankruptcy Code.
SECTION 2.9. Participant. For a particular Plan Year, the term
Participant shall mean an Employee who is a Participant in the Savings Plan who
(i) is unable to make all of the Before-Tax Contributions that he has elected to
make to the Savings Plan or unable to receive the maximum amount of Matching
Contributions under the Savings Plan because of the limitations imposed under
Section 402(g), 401(a)(17), 401(k)(3), 401(m) or 415 of the Code, and (ii) is in
salary grade 15 or above.
SECTION 2.10. Plan shall mean The North American Coal
Corporation Deferred Compensation Plan for Management Employees, as herein set
forth or as duly amended.
SECTION 2.11. Plan Administrator shall mean the Company.
SECTION 2.12. Plan Year shall mean the calendar year.
SECTION 2.13. Savings Plan shall mean The North American Coal
Corporation Retirement Savings Plan (or any successor plan).
SECTION 2.14. 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 2.15. Valuation Date shall mean the last business day
of each Plan Year.
<PAGE> 25
4
ARTICLE III
EXCESS RETIREMENT BENEFITS
SECTION 3.1 Excess 401(k) Benefits.
(a) Amount of Excess 401(k) Benefits. Each Participant
may, prior to the first day of any Plan Year or within 30 days of becoming a
Participant hereunder, by completing a Deferral Election Form or other form
approved by the Company, direct his Employer:
(i) to reduce his Compensation (as that term is
defined in the Savings Plan, but including amounts received in excess
of the limitation imposed by Code Section 401(a)(17) and amounts
deferred under this Plan) by the difference between (A) a certain
percentage, in 1% increments, with a maximum of 15%, of his
Compensation for the Plan Year, and (B) the maximum Before-Tax Deferral
Contributions actually permitted to be contributed for him to the
Savings Plan by reason of the application of the limitations under
Sections 402(g), 401(a)(17), 401(k)(3) and 415 of the Code; and
(ii) to credit the deferrals to the Sub-Account
described in Section 3.3(a) at the times described therein.
(b) Deferral Period. The Deferral Election Form
described in Subsection (a) above shall also contain such Participant's election
regarding the time of the commencement of payment of his Excess 401(k)
Sub-Account. In the Deferral Election Form, such Participant may elect to
commence payment of his Excess 401(k) Sub-Account on (i) the date on which he
ceases to be an Employee of a Controlled Group Member, (ii) the date on which he
attains an age specified in the Deferral Election Form, or (iii) the earlier or
later of such dates.
(c) Form of Payment. In the Deferral Election Form,
the Participant shall also elect whether to receive his benefits under the Plan
to which such Deferral Election Form relate in the form of a lump sum payment or
in annual installments for a period not exceeding ten years.
(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 Deferral Election is effective,
and the Participant shall not be eligible to receive such Excess 401(k)
Benefits. Instead, such amounts shall be credited to the Participant's
Sub-Account as provided in Section 3.3(a). Any directions made in accordance
with Subsections (a), (b) or (c) above shall be irrevocable and shall remain in
effect for subsequent Plan Years unless the directions are changed or terminated
by the Participant, on the appropriate form provided
<PAGE> 26
5
by the Plan Administrator, prior to the first day of such subsequent Plan Year.
Notwithstanding the foregoing, a Participant's direction to make deferrals of
Excess 401(k) Benefits shall automatically terminate on the earlier of the date
on which (i) the Participant ceases employment with the Employers, (ii) the
Participant's Employer is deemed Insolvent, (iii) the Participant is no longer
eligible to make deferrals of Excess 401(k) Benefits hereunder or (iv) the Plan
is terminated.
(d) Any Participant whose eligibility to make Before-Tax
Contributions to the Savings Plan has been suspended for any reason (including
the taking of a hardship withdrawal thereunder) shall not be eligible to defer
Excess 401(k) Benefits under this Plan for the period of his suspension from the
Savings Plan.
SECTION 3.2. Excess Matching Benefits.
(a) In General. A Participant shall have credited to
his Excess Matching Sub-Account an amount equal to the Matching Contributions
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), 401(m)
and 415 of the Code (collectively, the "Excess Matching Benefits").
(b) Time of Payment. The Excess Matching Benefits
shall be paid (or commence to be paid) at the time specified in the Deferral
Election Form for payment of Excess 401(k) Benefits deferred for the same Plan
Year in which Excess Matching Benefits are credited to the Sub-Account.
SECTION 3.3. Participant's Accounts. Each Employer shall
establish and maintain on its books for each Participant who is an Employee of
such Employer an Account which shall contain the following entries:
(a) Credits to an Excess 401(k) Sub-Account for the Excess
401(k) Benefits described in Section 3.1, which shall be credited to the
Sub-Account when a Participant is prevented from making a Before-Tax
Contribution under the Savings Plan;
(b) Credits to an Excess Matching Sub-Account for the Excess
Matching Benefits described in Section 3.2, which shall be credited to the
Sub-Account when a Participant is prevented from receiving Matching
Contributions under the Savings Plan;
(c) Credits to all Sub-Accounts for the earnings described in
Article IV, which shall continue until such Sub- Accounts have been distributed
to the Participant or his Beneficiary; and
(d) Debits for any distributions made from the Sub-Accounts.
<PAGE> 27
6
SECTION 3.4. Effect on other Benefits. Benefits payable to or
with respect to a Participant under the Savings Plan or any other
Employer-sponsored (qualified or nonqualified) plan, if any, are in addition to
those provided under this Plan.
SECTION 3.5. Statements. Participants shall be provided with
statements of their Account balances as soon as practicable following each
Valuation Date.
ARTICLE IV
EARNINGS
SECTION 4.1. For Active Employees. Except as described in
Section 4.2, at the end of each calendar month during a Plan Year, the Excess
401(k) Sub-Account and the Excess Matching Sub-Account of each Participant shall
be credited with earnings as follows:
(1) For Excess 401(k) Benefits and Excess Matching Benefits
attributable to amounts deferred by a Participant up to 7% of his Compensation,
at the end of each calendar month during a Plan Year, the portion of the Excess
401(k) Sub-Account and the Excess Matching Sub-Account attributable to such
Benefits for each such Participant shall be credited with an amount determined
by multiplying such portion of such Participant's average Sub-Account balance
during such month by the blended rate earned during such month by the Fixed
Income Fund under the Savings Plan. Notwithstanding the foregoing, in the event
that the Adjusted ROE determined for such Plan Year exceeds the rate credited to
the Participant's Sub-Accounts under the preceding sentence, the Participant's
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 such portion of 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.
(2) For Excess 401(k) Benefits and Excess Matching Benefits
attributable to amounts deferred by a Participant in excess of 7% of his
Compensation, at the end of each calendar month during a Plan Year, the portion
of the Excess 401(k) Sub- Account and Excess Matching Sub-Account attributable
to such Benefits for each such Participant shall be credited with an amount
determined by multiplying such portion of such Participant's average Sub-Account
balance during such month by the blended rate earned during such month by the
Fixed Income Fund under the Savings Plan.
SECTION 4.2. For Terminated Employees. The Sub-Accounts of a
Participant who has terminated employment with the Controlled Group shall be
credited with earnings as described in Section 4.1, as modified by this Section
4.2, until each Sub- Account has been distributed in full. The Adjusted ROE
<PAGE> 28
7
calculation described in the second sentence of Section 4.1(1) 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 NACCO Industries, Inc.
For any subsequent month, the Adjusted ROE calculation described in the second
sentence of Section 4.1(1) shall not apply. The Fixed Income Fund calculation
described in the first sentence of Section 4.1(1) and in the first sentence of
Section 4.2 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 Earnings Assumptions. The Committee (as
defined in Section 9.5 of the Plan) may change the earnings rate credited on
Accounts hereunder at any time upon at least 30 days notice to Participants.
SECTION 4.4. Limitations on Earnings Assumption.
Notwithstanding any provision of the Plan to the contrary, in no event will the
earnings rate credited to Accounts hereunder exceed 14%.
ARTICLE V
VESTING
A Participant shall always be 100% vested in amounts credited
to his Account hereunder.
ARTICLE VI
DISTRIBUTION OF BENEFITS TO PARTICIPANTS
SECTION 6.1. Time and Manner of Payment.
(a) Timing. The Excess 401(k) and Matching Benefits
shall be paid (or commence to be paid) to the Participant no later than the 30th
day after the date specified in the Participant's Deferral Election Form
pursuant to Section 3.1(b).
(b) Form. The Excess 401(k) and Excess Matching
Benefits may be distributed to the Participant either in the form of a lump sum
payment or in the form of annual installments for a period not exceeding ten
years, as selected by the Participant in the Deferral Election Form pursuant to
Section 3.1(c) with respect to such amounts. If installment payments are
elected, the first installment shall be paid on the date specified in Section
6.1(a) and shall be made annually thereafter, with each installment being based
on the value of the Account on the 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.
<PAGE> 29
8
(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 Participant an amount equal to all
or any part of the Participant's 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) Small Accounts. Notwithstanding any provision of
the Plan or a Participant's Deferral Election Form to the contrary, in the event
that the Account of a Participant does not exceed $5,000 at the time 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 his termination of employment.
SECTION 6.2. Liability for Payment/Expenses.
The Employer by which the Participant was last employed prior to his payment
commencement date under the Plan shall pay all Excess Retirement Benefits
hereunder 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 Excess Retirement Benefits payable to or on behalf of a
Participant are based on the Participant's employment with more than one
Employer, the liability for such Benefits shall be shared by all such Employers
(by reimbursement to the Employer making such payment) as may be agreed to among
them in good faith (taking into consideration the Participant's service and
Compensation paid by each such Employer) and as will permit the deduction (for
purposes of federal 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 Employers, as directed 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. 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 Retirement
Benefits shall be the estate of the last to die of the Participant and his
Beneficiaries. 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
<PAGE> 30
9
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. 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 7.2. Distributions to Beneficiaries.
(a) Amount of Benefits. The Excess Retirement Benefit payable
to a Participant's Beneficiary under this Plan shall be equal to such
Participant's Account balance on the date of the distribution of the Account to
the Beneficiary.
(b) Time of Payment. The Excess Retirement Benefits payable to
a Beneficiary under this Plan shall be paid as soon as practicable following the
death of the Participant.
(c) Manner of Payment. All Excess Retirement Benefits payable
to a Beneficiary hereunder shall be paid in the form of a lump sum payment.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. 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 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 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 an
Employer 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 Employers.
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 Employers solely at the will of
the Employers 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
<PAGE> 31
10
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 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.
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 jurisdiction, the remainder of the Plan and the application
of such provision to other circumstances or persons shall not be affected
thereby.
SECTION 8.7. Adoption by Other Employers. Any member of the
Controlled Group that is an Employer under the Savings Plan may adopt this Plan
with the consent of the Committee by executing an instrument evidencing its
adoption of this Plan on the order of its Board of Directors (or the applicable
committee of such Board of Directors) and filing a copy thereof with the
Company. Such adoption may be subject to such terms and conditions as the
Committee requires or approves.
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 sole
and absolute 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 determine the rights and status under the Plan of Participants, or
other persons, to resolve 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 an Employee 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 employee
or former employee hereunder shall be
<PAGE> 32
11
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 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 employee or former employee to any Excess
Retirement Benefits hereunder. Any employee or former employee 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 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,
<PAGE> 33
12
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.
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/
Employer Action. Any action taken by the Plan Administrator or an Employer
with respect to the rights or benefits under the Plan of any Employee or former
Employee shall be revocable by the Plan Administrator or the Employer 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 Employer'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 Nominating,
Organization and Compensation Committee of the Board of Directors of the Company
(the "Committee") may at any time (without the consent of an Employer) amend any
or all of the provisions of this Plan, except that (a) no such amendment may
adversely affect 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 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.
<PAGE> 34
13
SECTION 9.6. Termination.
(a) The Committee, in its sole discretion, may terminate this
Plan at any time and for any reason whatsoever, except that (i) no such
termination may adversely affect 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 Committee. Subject to the foregoing provisions of
this Subsection, 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, 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 Accounts hereunder be immediately distributed in the
form of a lump sum payment.
(c) Any Employer (other than the Company) that adopts the Plan
may elect to withdraw from the Plan and such withdrawal shall constitute a
termination of the Plan as to such Employer; provided, however, that such
terminating Employer shall continue to be an Employer for the purposes hereof as
to Participants or Beneficiaries to whom it owes obligations hereunder. Such
withdrawal and termination shall be expressed in an instrument executed by the
terminating Employer on authority of its Board of Directors (or the applicable
Committee thereof) and filed with the Company, and shall become effective as of
the date designated in such instrument or, if no such date is specified, on the
date of its execution. Notwithstanding any other provision of the Plan, if an
Employer (other than the Company) ceases to be a member of the Controlled Group,
the Plan shall automatically terminate with respect to such Employer and all
amounts credited to the Accounts of Employees of such Employer shall be
immediately payable in the form of a lump sum payment.
<PAGE> 35
14
Executed, this 18th day of December, 1995.
---- --------
THE NORTH AMERICAN COAL
CORPORATION
By: /s/ Charles A. Bittenbender
------------------------------
Title: Assistant Secretary
<PAGE> 36
THE NORTH AMERICAN COAL CORPORATION
DEFERRED COMPENSATION PLAN FOR MANAGEMENT EMPLOYEES
DEFERRAL ELECTION FORM
1. Election: Effective Date: Pursuant to the provisions of The North
American Coal Corporation Deferred Compensation Plan for Management Employees
(the "Plan"), I hereby direct my Employer to reduce my Compensation in the
manner specified below, effective January 1, 19__ ("Effective Date"), and to
credit such amount to my Account under the Plan. I understand that
(a) to be effective at such time, this Notice of Election must be
filed with the Company prior to the Effective Date, and
(b) once effective, this election to defer shall be irrevocable
as to the amounts that are deferred pursuant to this Deferral Election
Form for the calendar year beginning on the Effective Date and for
each subsequent calendar year unless changed or terminated as
described in Section 4 below.
2. Amounts Deferred: The amount of Compensation deferred shall be
______% of Compensation (in 1% increments, with a maximum of 15% of my
Compensation for the calendar year) less the maximum amount of Before-Tax
Contributions actually permitted to be contributed to The North American Coal
Corporation Retirement Savings Plan by or for me for such year by reason of the
application of the limitations under Sections 402(g), 401(a)(17), 415 and
401(k)(3) of the Code.
3. Deferment Period: I elect to have payment of the portion of my
Account attributable to the amount deferred under Section 2 of this Deferral
Election Form commence 30 days after:
_____ the date on which I cease to be an Employee of any member of the
Controlled Group.
_____ the date on which I attain age ______.
_____ the later of (a) the date on which I attain age ____, or (b) the
date on which I cease to be an Employee of the Controlled Group.
_____ the earlier of (a) the date on which I attain age ____, or (b)
the date on which I cease to be an Employee of the Controlled
Group.
<PAGE> 37
2
4. Method of Payment: I elect to receive the amounts credited to my
account pursuant to this form in the following manner:
_____ a lump sum; or
_____ annual installments over a period of ______ years.
5. Beneficiary Designation: I hereby designate the natural or legal
person(s) indicated below as my beneficiary(ies) under the Plan to receive any
amounts credited to my account under the Plan that remain unpaid at my death:
________________________ _________% ___________________
Name Proportion Relationship
________________________________________________________________________________
Address
________________________ _________% ___________________
Name Proportion Relationship
________________________________________________________________________________
Address
________________________ _________% ___________________
Name Proportion Relationship
________________________________________________________________________________
Address
This designation supercedes any previous beneficiary designation made
by me with respect to the amounts credited to my account under the Plan and
shall become effective when received by the Company, provided I am then alive. I
hereby reserve the right to change any beneficiary designation listed above at
any time by filing a subsequent beneficiary designation with the Company prior
to my death.
6. Acknowledgement: I acknowledge that I have reviewed the Plan and
understand that my participation will be subject to the terms and conditions
contained in the Plan. I understand that:
(a) all of the elections contained in Sections 1 through 4 of this
Deferral Election Form are irrevocable for the calendar year beginning on
the Effective Date and for each subsequent calendar year unless changed or
terminated in the manner described below;
<PAGE> 38
3
(b) I may change any election contained in this Deferral Election
Form by filing a new Deferral Election Form with the Company prior to
January 1 of the calendar year for which such change is to be effective;
(c) I may terminate the deferral of Compensation by filing a Notice
of Termination, on a form provided by the Company, with the Company prior
to January 1 of the calendar year for which such termination is to be
effective; and
(d) on and after January 1 of any calendar year, the elections
contained in this Deferral Election Form may be changed or terminated only
for the next calendar year.
I further understand that if my Employer is declared insolvent or in
the event of my Employer's bankruptcy, I will be a general unsecured creditor of
my Employer for the amount of my account under the Plan.
7. Construction: Terms used in this Deferral Election Form with
initial capital letters that are defined in the Plan shall have the meanings set
forth in the Plan unless a different meaning is clearly required by the context.
Executed this ____ day of _____________________________, 19 __.
_________________________________________
Signature
_________________________________________
Print or Type Name
Received by Company:
_________________________________________
Signature
_________________________________________
Date
<PAGE> 39
THE NORTH AMERICAN COAL CORPORATION
DEFERRED COMPENSATION PLAN FOR MANAGEMENT EMPLOYEES
NOTICE OF TERMINATION
Pursuant to the provisions of The North American Coal Corporation
Deferred Compensation Plan for Management Employees (the "Plan"), I hereby
terminate my election to defer the payment of the Compensation payable to me for
services as an employee of the Controlled Group effective January 1, ______.
I understand that to be effective on such date, this Notice of
Termination must be filed with the Company prior to such date.
EXECUTED this ____ day of ________________________, _____.
Executed this ____ day of ________________________, 19 __.
_________________________________________
Signature
_________________________________________
Print or Type Name
Received by Company:
_________________________________________
Signature
_________________________________________
Date
<PAGE> 40
Exhibit 10 (xlii)
AMENDMENT NO. 1
TO THE
THE NORTH AMERICAN COAL CORPORATION
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
(AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 1994)
The North American Coal Corporation hereby adopts this
Amendment No. 1 to The North American Coal Corporation Supplemental Retirement
Benefit Plan (as Amended and Restated Effective September 1, 1994) (the "Plan"),
effective as of December 31, 1994. Words and phrases used herein with initial
capital letters which are defined in the Plan are used herein as so defined.
Section 1
Section 2.1(10) of the Plan is hereby amended in its entirety
to read as follows:
"SECTION 2.1(10): "Pension Plan" shall mean The
NACCO Industries, Inc. Pension Plan for Salaried Employees (terminated November
30, 1986), or Part I of The Combined Defined Benefit Plan for NACCO Industries,
Inc. and Its Subsidiaries (commonly referred to as The North American Coal
Corporation Salaried Employees Pension Plan, which includes The NACCO
Industries, Inc. Pension Plan for Salaried Employees which was merged into such
plan on December 31, 1993)."
EXECUTED this 1st day of December, 1995.
THE NORTH AMERICAN COAL CORPORATION
By: /s/ Charles A. Bittenbender
-----------------------------
Title: Assistant Secretary
<PAGE> 41
EXHIBIT 10(lviii)
NAACO MATERIALS HANDLING GROUP, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
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.
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
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.
INCENT96.DOC
<PAGE> 42
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 recommendations 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 midpoint of the participant's salary grade
to determine his individual target incentive compensation award. The total of
the target corporate 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.
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 factor 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 Pool 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 it 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 for employees covered by the Marketing Incentive Compensation Plan
will be based on competitive levels.
DETERMINATION OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS
- ---------------------------------------------------------
Salary Job Grades and the corresponding target incentive percentages
for each participant in the Plan will be established at the beginning of each
year and approve 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 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.
INCENT96.DOC
<PAGE> 43
Exhibit 10 (lxxiv)
THE NACCO MATERIALS HANDLING GROUP, INC.
UNFUNDED BENEFIT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996)
<PAGE> 44
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 January 1,
1996:
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
January 1, 1996.
SECTION 1.2. Purpose of the Plan. The purpose of this Plan is to
provide for certain Employees of the Employers benefits they would have received
under the Qualified Plans but for (1) the dollar limitation on Compensation
taken into account under the Qualified Plans as a result of Section 401(a)(17)
of the Code, (2) the limitations imposed under Section 415 of the Code, and (3)
the limitations under Sections 402(g), 401(k)(3) and 401(m) of the Code.
SECTION 1.3. Governing Law. This Plan shall be regulated, construed and
administered under the laws of the State of Oregon, 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
<PAGE> 45
2
include the plural unless otherwise clearly required by the context.
SECTION 1.5. Construction of Plan. The Plan provides benefits for
Employees who are Participants in two separate Qualified Plans. References
throughout this Plan to a "Qualified Plan" shall be deemed to refer to the
particular Qualified Plan in which the Participant participates.
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 in accordance
with Section 3.6 by the Employer as the sum of the Participant's Excess Profit
Sharing Sub-Account, Excess 401(k) Sub-Account, Excess Matching Sub-Account and
Excess 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 general accepted accounting principles
("GAAP"), for the Company or NACCO
<PAGE> 46
3
Industries, Inc. and its subsidiaries, as applicable, 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 or
NACCO Industries, Inc. 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 or NACCO Industries, Inc.,
as applicable, 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) For Participants who are Employees of NACCO Industries, Inc.,
"Adjusted ROE" shall mean the average return on equity of NACCO Industries, Inc.
calculated for the applicable time period, based on A divided by B, where:
<PAGE> 47
4
A = Net Income (before extraordinary items) + Amortization of Goodwill;
and
B = Weighted Average (Stockholders' Equity + Accumulated Amortization of
Goodwill + UMWA Adjustment).
(c) For Participants who are Employees of the Company, "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).
(d) Adjusted ROE shall be determined at least annually by the
Employers.
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 III of The Combined
Defined Benefit Plan for NACCO Industries, Inc. and Its Subsidiaries (commonly
known as the NACCO Materials Handling Group, Inc. Cash Balance Plan) or any
successor thereto.
SECTION 2.6. Company shall mean NACCO Materials Handling Group, Inc. or
any entity that succeeds NACCO Materials Handling Group, Inc. by merger,
reorganization or otherwise.
<PAGE> 48
5
SECTION 2.7. Compensation shall have the same meaning as under the
Profit Sharing 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).
SECTION 2.8. Employer shall mean the Company and NACCO Industries, Inc.
SECTION 2.9. Excess Retirement Benefit shall mean an Excess Pension
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 2.10. Excess Deferrals shall mean the amounts deferred under
this Plan by certain Employees of the Company pursuant to elections in effect
prior to January 1, 1996, as described in Section 3.3 hereof.
SECTION 2.11: 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 2.12. 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 2.13. Insolvent. For purposes of this Plan, an Employer shall
be considered Insolvent at such time as it (a) is
<PAGE> 49
6
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 2.14. Participant. For purposes of Section 3.1 of the Plan, the
term "Participant" shall mean a Participant in the Cash Balance Plan who is an
Employee of an Employer whose benefit under the Cash Balance Plan is limited by
the application of Section 401(a)(17) or 415 of the Code and who is designated
as a Participant in this Plan by the Administrative Committee under the
applicable Qualified Plan. For purposes of Section 3.2 of the Plan, the term
"Participant" shall mean a Participant in the profit sharing portion of the
Profit Sharing Plan (1) whose profit sharing benefit is limited by the
application of Section 401(a)(17) or 415 of the Code and (2) who is either an
Employee of NACCO Industries, Inc. and has at least 950 Hay Points or is an
Employee of the Company and whose base salary as of the November 1 of the
preceding Plan Year was at least $100,000. For purposes of Section 3.4 of the
Plan, the term "Participant" shall mean a 401(k) Employee who (a) 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 (b) is
either an Employee of NACCO Industries, Inc. and has at least 950 Hay points or
is an Employee of the Company and whose base salary as of the November 1 of the
preceding Plan Year was at least $100,000. The
<PAGE> 50
7
term "Participant" shall also include (a) any person who made Executive
Deferrals hereunder pursuant to a deferral election in effect prior to January
1, 1996, and (b) any other person, as of December 31, 1995, was a participant in
the Plan.
SECTION 2.15. Plan shall mean the NACCO Materials Handling Group, Inc.
Unfunded Benefit Plan, as herein set out or as duly amended.
SECTION 2.16. Plan Administrator shall mean the Company.
SECTION 2.17. Plan Year shall mean the calendar year.
SECTION 2.18. Prior Plan shall mean the Yale Materials Handling
Corporation Unfunded Deferred Compensation Plan.
SECTION 2.19. Profit Sharing Employee shall mean a participant in the
Profit Sharing Plan who is eligible for Profit Sharing Contributions.
SECTION 2.20. Profit Sharing Plan shall mean the NACCO Materials
Handling Group, Inc. Profit Sharing Plan or any successor thereto.
SECTION 2.21. Qualified Plan shall mean (a) for Cash Balance Employees,
the Cash Balance Plan and (b) for Profit Sharing Employees, the profit-sharing
portion of the Profit Sharing Plan and (c) for 401(k) Employees, the Before-Tax
Contributions and Matching Employer Contributions portion of the Profit Sharing
Plan.
SECTION 2.22. 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
<PAGE> 51
8
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 2.23. Valuation Date shall mean the last day of each Plan Year.
ARTICLE III
EXCESS RETIREMENT BENEFITS
SECTION 3.1. Excess Pension Benefits. The Excess Pension Benefit
payable to or with respect 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 the Participant under the Qualified
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 this Plan, over (b) the amount of the monthly benefit
that is actually payable to the Participant under such Qualified Plan.
SECTION 3.2. Excess Profit Sharing Benefits.
(a) In General. At the time described in Section 3.6(a), 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
<PAGE> 52
9
not contain the limitations imposed under Sections 401(a)(17) and 415 of the
Code and (2) the term "Compensation" (as defined in Section 2.7 hereof) were
used for purposes of determining the amount of profit sharing contributions
under the Qualified 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.
(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 the Effective Date.
SECTION 3.3. Excess Deferral Benefits.
(a) In General. Prior to January 1, 1996, certain Employees of the
Company were permitted to elect to defer specified amounts of salary and bonus
under the Plan (collectively, the "Excess Deferrals"). The Excess Deferrals were
credited to the Sub-Account described in Section 3.6(b), provided that the
Excess Deferrals relating to bonus payments which were earned in 1995 but will
be paid during the first quarter of 1996 will be credited to such Sub-Account in
1996.
(b) Payment Date. At the time the Excess Deferrals were elected, the
Participant was required to designate the date of commencement of payment of his
Excess Deferrals by choosing one of the following dates: (a) the date on which
he ceases to be an employee of a Controlled Group Member, (b) the date on which
<PAGE> 53
10
he attains an age specified in the election form, or (c) the earlier or later
of such dates.
SECTION 3.4. Excess 401(k) Benefits
(a) Amount of Excess 401(k) Benefits. Each 401(k) Employee who is a
Participant under the terms of this Plan, may, prior to the first day of any
Plan Year, by completing a Notice of Election to Defer Compensation or other
form approved by his Employer ("Deferral Election Form"), direct his Employer:
(i) to reduce his Compensation (as that term is defined in
Section 2.7 hereof) by the difference between (A) a certain percentage,
in 1% increments, with a maximum of 17%, of his Compensation for the
calendar year, and (B) the maximum Before-Tax Contributions actually
permitted to be contributed for him to the Profit Sharing Plan by
reason of the application of the limitations under Sections 402(g),
401(a)(17), and 401(k)(3) of the Code; and,
(ii) to credit the deferrals (collectively, the "Excess 401(k)
Benefits") to the Sub-Account described in Section 3.6(c) at the times
described therein.
(b) Deferral Period. The deferral election described in Subsection (a)
above shall also contain such Participant's election regarding the time of the
commencement of payment of his Excess 401(k) Sub-Account. In the Deferral
Election Form, such Participant may elect to commence payment of his Excess
401(k) Sub-Account on (i) the date on which he ceases to be an employee of a
Controlled Group Member, (ii) the date on which he attains
<PAGE> 54
11
an age specified in the Deferral Election Form, or (iii) the earlier or later
of such dates.
(c) Effect and Duration of Deferral Election. Any direction by a 401(k)
Employee who is a Participant in this Plan to make deferrals of Excess 401(k)
Benefits hereunder shall be effective with respect to Compensation otherwise
payable to the Participant, and the Participant shall not be eligible to receive
such Excess 401(k) Benefits. Instead such amounts shall be credited to the
Participant's Sub-Account as provided in Section 3.6(c). Any directions made in
accordance with Subsections (a) or (b) above shall be irrevocable and shall
remain in effect for subsequent Plan Years unless changed or terminated for
subsequent Plan Years by the Participant, on the appropriate form provided by
the Plan Administrator, prior to the first day of such subsequent Plan Year.
Notwithstanding the foregoing, a Participant's direction to make deferrals of
Excess 401(k) Benefits shall automatically terminate on the earlier of the date
on which (i) the Participant ceases employment with the Employers, (ii) the
Participant's Employer is deemed Insolvent, (iii) the Participant is no longer
eligible to make deferrals of Excess 401(k) Benefits hereunder or (iv) the Plan
is terminated.
SECTION 3.5. Excess Matching Benefits.
(a) In General. A 401(k) Employee who is a Participant in the Plan
shall have credited to his Excess Matching Sub- Account an amount equal to the
Matching Employer Contributions that he is prevented from receiving under the
Profit Sharing Plan because of the limitations of Code Sections 402(g),
401(a)(17),
<PAGE> 55
12
401(k)(3) and 401(m) of the Code (collectively, the "Excess Matching Benefits").
(b) Time of Payment. The Excess Matching Benefits, to the extent
vested, shall be paid (or commence to be paid) at the time specified in the
Deferral Election Form for payment of Excess 401(k) Benefits deferred for the
same Plan Year in which Excess Matching Benefits are credited to the
Sub-Account.
SECTION 3.6. Participant's 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 3.2, 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 an Excess Deferral Sub-Account for the Excess Deferrals
described in Section 3.3;
(c) Credits to an Excess 401(k) Sub-Account for the Excess 401(k)
Benefits described in Section 3.4, 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 an Excess Matching Sub-Account for the Excess Matching
Benefits described in Section 3.5, which shall be credited to the Sub-Account
when a 401(k) Employee is prevented from receiving Matching Employer
Contributions under the Qualified Plan;
<PAGE> 56
13
(e) Credits to the appropriate Sub-Account of a 401(k) Employee who was
an Employee of NACCO Industries, Inc. on December 1, 1994 of the amount of any
and all liabilities of NACCO Industries, Inc. on December 1, 1994 under the
North American Coal Corporation Deferred Compensation Plan for Management
Employees;
(f) Credits to Sub-Accounts for the earnings described in Article IV,
which shall continue until the vested portions of such Sub-Accounts have been
distributed to the Participant or his Beneficiary; and
(g) Debits for any distributions made from the Sub-Accounts. 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.
SECTION 3.7. Effect on other Benefits. Benefits payable to or with
respect to a Participant under the Qualified Plans or any other Employer
sponsored (qualified or nonqualified) plan, if any, are in addition to those
provided under this Plan.
ARTICLE IV
EARNINGS
SECTION 4.1. For Active Profit Sharing Employees. Except as provided in
Section 4.4, at the end of each calendar month during a Plan Year, the Excess
Profit Sharing Sub-Account of each Participant shall be credited with an amount
determined
<PAGE> 57
14
by multiplying such Participant's average Excess Profit Sharing Sub-Account
balance during such month by the blended rate earned during such month by the
Fixed Income Fund under the Profit Sharing Plan. 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 Participant's
Excess Profit Sharing Sub-Account under the preceding sentence, such Sub-Account
shall retroactively be credited with the difference between (a) the amount
determined under the preceding sentence, and (b) 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.
SECTION 4.2. For Active 401(k) Employees. Except as provided in Section
4.4, at the end of each calendar month during a Plan Year, the Excess 401(k)
Sub-Account and the Excess Matching Sub-Account of each 401(k) Employee shall be
credited with an amount of earnings determined as follows: (a) in accordance
with the provisions of Section 4.1 for Excess 401(k) Benefits and Excess
Matching Benefits attributable to amounts deferred pursuant to Section 3.4 by a
401(k) Employee up to 7% of his Compensation and (b) by multiplying Excess
401(k) Benefits and Excess Matching Benefits attributable to amounts deferred
pursuant to Section 3.4 in excess of 7% of Compensation by the blended rate
earned during such month by the Fixed Income Fund under the Profit Sharing Plan.
<PAGE> 58
15
SECTION 4.3. For Active Participants With Excess Deferral Benefits.
Effective January 1, 1996, the Excess Deferral Sub-Account described in Section
3.6(b) of the Plan shall be divided into two parts. One part will consist of
Excess Deferrals (plus earnings through December 31, 1995) attributable to
amounts deferred up to 7% of Compensation ("Excess Deferral Sub-Account No. 1")
and the other part will consist of Excess Deferrals (plus earnings through
December 31, 1995) attributable to amounts deferred in excess of 7% of
Compensation ("Excess Deferral Sub-Account No. 2"). Except as provided in
Section 4.4, at the end of each calendar month during a Plan Year commencing on
or after January 1, 1996, the Excess Deferral Sub-Account of each Participant
shall be credited with an amount of earnings determined as follows: (a) the
Excess Deferral Sub-Account No. 1 will be credited with earnings in accordance
with the provisions of Section 4.1 and (b) the Excess Deferral Sub-Account No. 2
shall be credited with earnings by multiplying the average balance of such
Sub-Account by the blended rate earned during such month by the Fixed Income
Fund under the Profit Sharing Plan.
SECTION 4.4. For Terminated Employees. The Sub-Accounts of a
Participant who has terminated employment with the Controlled Group shall be
credited with earnings as described in Section 4.1, 4.2, or 4.3 as modified by
this Section 4.4, until the vested portion of each Sub-Account has been
distributed in full. The Adjusted ROE calculation described in the second
sentence of Section 4.1 shall be made during the month in which
<PAGE> 59
16
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, the Adjusted ROE calculation described in the second sentence of Section
4.1 shall not apply. The Fixed Income Fund calculation described in the first
sentence of Sections 4.1 and 4.2 and the third sentence of Section 4.3 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 4.5. Limitation on Earnings Assumption. Notwithstanding any
provision of the Plan to the contrary, in no event will the earnings rate
credited to Accounts hereunder exceed 14%.
SECTION 4.6. Changes in Earnings Assumption. The Nominating,
Organization and Compensation Committee of the Board of Directors of the Company
may change the earnings rate credited on Accounts hereunder at any time upon at
least 30 days advance notice to Participants.
ARTICLE V
VESTING
A Participant shall not become vested in his Excess Pension Benefit or
Excess Profit Sharing Benefit until he becomes vested in the corresponding
benefit under the applicable underlying Qualified Plan and the Excess Pension
Benefit and/or Excess Profit Sharing Benefit of a Participant who is partially
<PAGE> 60
17
or fully vested under the applicable underlying Qualified Plan shall at all
times be vested hereunder to the extent he is so vested. A Participant shall
always be 100% vested in his Excess Deferral Benefit, his Excess 401(k) Benefit
and his Excess Matching Benefit hereunder. The non-vested portion of any Benefit
shall be forfeited upon a Participant's termination of employment with the
Controlled Group, in accordance with the vesting, forfeiture and service rules
contained in the applicable underlying Qualified Plan.
ARTICLE VI
DISTRIBUTION OF BENEFITS TO PARTICIPANTS
SECTION 6.1. Time and Manner of Payment.
(a) Excess Pension Benefits and Excess Profit Sharing Benefits. The
Excess Pension Benefit and Excess Profit Sharing Benefit payable to a
Participant shall be paid in the form of a single lump sum payment at the time
the benefits payable to the Participant under the applicable underlying
Qualified Plan commence to be paid. For purposes of the Excess Pension Benefit,
such lump sum amount shall be equal to the Actuarial Equivalent present value of
such Excess Pension Benefit.
(b) Excess Deferral Benefits, Excess 401(k) Benefits and Excess
Matching Benefits.
(i) Timing. The Excess Deferral Benefits shall be paid (or
commence to be paid) to the Participant at the time specified in the
Participant's deferral election form pursuant to Section 3.3(b). The Excess
401(k) Benefits and Excess Matching
<PAGE> 61
18
Benefits (to the extent vested) shall be paid (or commence to be paid) to the
401(k) Employee at the time specified in the Deferral Election Form.
(ii) Form. The Excess Deferral Benefit, Excess 401(k) Benefit
and/or Excess Matching Benefit, to the extent vested, shall be distributed to
the Executive or the 401(k) Employee, as the case may be, 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. Notwithstanding the foregoing, the Participant may
elect to receive his Excess Deferral Benefit, Excess 401(k) Benefit and/or
Excess Matching Benefit, to the extent vested, 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 while he is alive and filed with
the Plan Administrator at least one year prior to the time he had elected to
commence receiving payment of his Excess Deferral Sub-Account or the portion of
his Excess 401(k) Sub-Account and/or Excess Matching Sub- Account to which such
election applies. 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
<PAGE> 62
19
had elected to commence receiving payment of his Excess Deferral Sub-Account or
the portion of his Excess 401(k) Sub-Account and/or Excess Matching Sub-Account
to which such election applies.
(c) 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
vested portion of such 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 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. 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 make Excess 401(k)
Benefits under this Plan for the period of his suspension from the Profit
Sharing Plan.
(d) Small Accounts. Notwithstanding the foregoing, in the event that
the vested portion of a Participant's Account does not exceed $5,000 at the time
of the Participant's termination of employment with the Controlled Group, such
vested portion of his Account shall automatically be paid to him in a single
lump sum
<PAGE> 63
20
payment as soon as practicable following his termination of employment.
SECTION 6.2. 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 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. 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 and/or his
Excess 401(k) Benefits, and/or his Excess Matching Benefits and/or his Excess
Profit Sharing Benefits shall be his Beneficiary under the applicable Qualified
Plan, and (b) the Beneficiary of a Participant for his Excess Deferral 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
<PAGE> 64
21
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
Qualified Plans. In other words, the Beneficiary hereunder need not be the same
as under the Qualified Plan.
(b) Any change in Beneficiary shall be made by giving written notice
thereof to the Employer and any change shall be effective only if received by
the Employer prior to the death of the Participant.
SECTION 7.3. Distributions to Beneficiaries.
(a) Amount of Benefits.
(1) 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 (i) the amount of the monthly
benefit that would be payable to the Beneficiary last effectively
designated by the Participant under the applicable underlying
Qualified Plan (in
<PAGE> 65
22
the form actually paid) if such Plan did not contain the
limitations imposed under Sections 401(a)(17) and 415 of the Code,
over (ii) the amount of the monthly benefit that is actually paid
to such Beneficiary under such Plan.
(2) Amount of Excess Profit Sharing Benefit. The Excess Profit Sharing
Plan Benefit payable to a Participant's Beneficiary under this Plan
shall be equal to such Participant's vested Excess Profit Sharing
Sub-Account balance on the date of the distribution of the
Sub-Account to the Beneficiary.
(3) Amount of Excess Deferral Benefit. The Excess Deferral Benefit
payable to a Participant's Beneficiary under this Plan shall be
equal to such Participant's Excess Deferral Sub-Account balance on
the date of the distribution of the Sub-Account to the Beneficiary.
(4) Amount of Excess 401(k) Benefit. The Excess 401(k) Benefit payable
to a Participant's Beneficiary under this Plan shall be equal to
such Participant's Excess 401(k) Sub-Account balance on the date of
the distribution of the Sub-Account to the Beneficiary.
(5) Amount of Excess Matching Benefit. The Excess Matching Benefit
payable to a Participant's Beneficiary under this Plan shall be
equal to such Participant's vested Excess Matching Sub-Account
<PAGE> 66
23
balance on the date of the distribution of the Sub-Account to the
Beneficiary.
(b) Time of Payment.
(1) Excess Pension Benefit. The Excess Pension Benefit payable to a
Beneficiary under this Plan shall be paid at the time the benefits
payable to the Beneficiary last effectively designated by the
Participant under the applicable underlying Qualified Plan commence
to be paid.
(2) Excess Profit Sharing Benefit/Excess Deferral Benefit/Excess 401(k)
Benefit/Excess Matching Benefit. The Excess Profit Sharing Benefit,
Excess 401(k) Benefit, Excess Matching Benefit and Excess Deferral
Benefit payable to a Beneficiary under this Plan shall be paid as
soon as practicable following the death of the Participant.
(c) Manner of Payment. All Excess Retirement Benefits payable to a
Beneficiary hereunder shall be paid in the form of a lump sum payment. For
purposes of the Excess Pension Benefit, such lump sum amount shall be equal to
the Actuarial Equivalent present value of such Excess Pension Benefit.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Liability of Employer. Nothing in this Plan shall
constitute the creation of a trust or other fiduciary
<PAGE> 67
24
relationship between an Employer 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 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 or Beneficiary as
provided herein. Each Participant and Beneficiary shall have the status of a
general unsecured creditor of the Employers.
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 an Employer solely at the will of such Employer
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,
<PAGE> 68
25
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 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.
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 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 sole
and absolute 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 determine the rights and status under the Plan of Participants or
other persons, to resolve
<PAGE> 69
26
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 an employee 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 employee or former employee
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 employee or former employee to
<PAGE> 70
27
any Excess Retirement Benefits hereunder. Any employee or former employee 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 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
<PAGE> 71
28
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.
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 employee or former employee 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
<PAGE> 72
29
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 Nominating, Organization and Compensation
Committee of the Board of Directors of the Company (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 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
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 Committee (without the consent of any Employer), in its sole
discretion, may terminate this Plan at any time and for any reason whatsoever,
except that (i) no such termination may adversely affect any Participant's
vested Excess Retirement Benefit as of the date of such termination and (ii) no
such termination may suspend the crediting of earnings on the
<PAGE> 73
30
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
Committee. 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.
SECTION 9.7. 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 9.6, treating the Employer
as if it were the Company.
<PAGE> 74
31
Executed, this 12th day of December, 1995.
NACCO MATERIALS HANDLING GROUP,
INC.
By: Geoffrey D. Lewis
----------------------------
Title: Vice President
<PAGE> 75
THE NACCO MATERIALS HANDLING GROUP, INC.
UNFUNDED BENEFIT PLAN
Notice of
Election to Defer Compensation
1. Election: Effective Date: Pursuant to the provisions of the
NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (the "Plan"), I
hereby direct my Employer to reduce my Compensation in the manner specified
below, effective January 1, 19__ ("Effective Date"), and to credit such amount
to my Account under the Plan. I understand that
(a) to be effective at such time, this Notice of Election must
be filed with my Employer prior to the Effective Date, and
(b) once effective, this election to defer shall be irrevocable
as to the amounts that are deferred pursuant to this Notice of Election
for the calender year beginning on the Effective Date and for each
subsequent calender year unless changed or terminated as described in
Section 4 below.
2. Amounts Deferred: The amount of Compensation deferred shall be
____% of Compensation (in 1% increments, with a maximum of 17% of my
Compensation for the calendar year) less the maximum amount of Before-Tax
Contributions actually permitted to be contributed to the NACCO Materials
Handling Group, Inc. Profit Sharing Plan by or for me for such year by reason of
the application of the limitations under Sections 402(g), 401(a)(17), and
401(k)(3) of the Code.
<PAGE> 76
2
3. Deferment Period: I elect to have payment of the portion of my
Account attributable to the amount deferred under Section 2 of this Notice of
Election commence 30 days after:
___ the date on which I cease to be an Employee of any member of
the Controlled Group.
___ the date on which I attain age ___.
___ the later of (a) the date on which I attain age ___, or (b) the
date on which I cease to be an Employee of the Controlled
Group.
___ the earlier of (a) the date on which I attain age ___, or (b)
the date on which I cease to be an Employee of the Controlled
Group.
4. Acknowledgement: I acknowledge that I have reviewed the Plan
and understand that my participation will be subject to the terms and conditions
contained in the Plan. I understand that:
(a) all of the elections contained in Sections 1 through 3 of this
Notice of Election are irrevocable for the calendar year beginning on the
Effective date and for each subsequent calendar year unless changed or
terminated in the manner described below;
(b) I may change any election contained in this Notice of Election
by filing a new Notice of Election with my Employer prior to January 1 of
the calendar year for which such change is to be effective;
<PAGE> 77
3
(c) I may terminate the deferral of Compensation by filing a Notice
of Termination, on a form provided by my Employer, with my Employer prior
to January 1 of the calendar year for which such termination is to be
effective; and
(d) on and after January 1 of any calendar year, the elections
contained in this Notice of Election may be changed or terminated only for
the next calendar year.
I further understand that if my Employer is declared insolvent or in
the event of my Employer's bankruptcy, I will be a general unsecured
creditor of my Employer.
5. Construction: Terms used in this Notice of Election with initial
capital letters that are defined in the Plan shall have the meanings set
forth in the Plan unless a different meaning is clearly required by the
context.
Executed this ____ day of _______________ , 19___.
______________________________________
Signature
______________________________________
Print or Type Name
Received by Employer:
______________________________________
Signature
______________________________________
Date
<PAGE> 78
THE NACCO MATERIALS HANDLING GROUP, INC.
UNFUNDED BENEFIT PLAN
Notice of
Form of Benefit Payment
1. Election of Form of Benefit: Pursuant to the provisions of the
NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (the "Plan"), I
hereby elect that the portion of my Account attributable to my Excess Deferral
Benefit, my Excess 401(k) Benefit and my Excess Matching Benefit (as
applicable) be paid in one of the following forms: (Elect One):
_____ A lump sum cash payment.
_____ Annual Installments over a period of _____ Years (must
not exceed 9).
I understand that if I fail to make an election or if my election is for any
reason not effective, the portion of my Account attributable to my Excess
Deferral Benefit, my Excess 401(k) Benefit and my Excess Matching Benefit (as
applicable) will automatically be paid in the form of annual installments for a
period of 10 years.
2. Effective Date: I understand that in order for this election to be
effective, it must be received by the Plan Administator at least one year prior
to the date on which I elected to commence payment of the portion of my Account
attributable to my Excess Deferral Benefit, my Excess 401(k) Benefit and my
Excess Matching Benefit (as applicable).
3. Acknowledgement: I acknowledge that I have reviewed the Plan and
understand that my election will be subject
<PAGE> 79
2
to the terms and conditions contained in the Plan. I understand that I may
change this election by filing a new election form with my Employer at least
one year prior to the date on which I elected to commence payment of the
portion of my Account attributable to my Excess Deferral Benefit, my Excess
401(k) Benefit and Excess Matching Benefit (as applicable).
4. Construction: Terms used in this Notice of Election with initial
capital letters that are defined in the Plan shall have the meanings set forth
in the Plan unless a different meaning is clearly required by the context.
Executed this___day of______________, 19___.
________________________________
Signature
________________________________
Print or Type Name
Received by Employer:
________________________________
Signature
________________________________
Date
<PAGE> 80
Exhibit 10 (lxxxviii)
THE HAMILTON BEACH/PROCTOR-SILEX, INC.
UNFUNDED BENEFIT PLAN
(As Amended and Restated Effective January 1, 1996)
<PAGE> 81
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
January 1, 1996.
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 January 1, 1996.
SECTION 1.2. Purpose of the Plan. The purpose of this Plan is
to provide for certain Employees of the Company benefits they would have
received (a) 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 (2) the limitations imposed under Section 415 of the Code, and/or (b) under
the Savings Plan but for the limitations imposed under Section 402(g), 401(m),
401(a)(17) or 401(k)(3) 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 in
accordance with Section 3.4 by the Company as the sum of the Participant's
Excess 401(k) Sub-Account and Excess Matching Sub- Account.
<PAGE> 82
2
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 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.
<PAGE> 83
3
SECTION 2.6. Company shall mean Hamilton Beach/ Proctor-Silex,
Inc.
SECTION 2.7. Excess Retirement Benefit shall mean an Excess
Pension Benefit, an Excess 401(k) Benefit or an Excess Matching Benefit (as
described in Article III) which is payable to or with respect to a Participant
under this Plan.
SECTION 2.8. 401(k) Employee shall mean a participant in the
Savings Plan who is eligible for Before-Tax 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. 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 Retirement Funds Investment Committee as the
successor to the Stable Asset Fund.
SECTION 2.11. Participant shall mean (a) 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 and/or (b) 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 and above.
SECTION 2.12. Plan shall mean the Hamilton
Beach/Proctor-Silex, Inc. Unfunded Benefit Plan as herein set forth or as duly
amended.
SECTION 2.13. Plan Administrator shall mean the Company.
SECTION 2.14. Plan Year shall mean the calendar year.
SECTION 2.15. Qualified Plan shall mean (a) for Cash Balance
Employees, the Cash Balance Plan and (b) for 401(k) Employees, the Savings Plan.
SECTION 2.16. 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.
<PAGE> 84
4
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 business day
of each Plan Year.
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 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 401(k) Benefits.
(a) Amount of Excess 401(k) Benefits. Each 401(k)
Employee who is a Participant under the terms of this Plan, may, prior to
the first day of any Plan Year, by completing a Notice of Election to Defer
Compensation or other form approved by the Company ("Deferral Election Form"),
direct the Company:
(i) to reduce his Compensation (as that term
is defined in the Savings Plan, but including amounts received in excess of the
limitations imposed under Code Section 401(a)(17) and amounts deferred under
this Plan) by the difference between (A) a certain percentage, in 1% increments,
with a maximum of 15%, of his Compensation for the calendar year, and (B) the
maximum Before-Tax Contributions actually permitted to be contributed for him to
the Savings Plan by reason of the application of the limitations imposed under
Sections 402(g), 401(a)(17), or 401(k)(3) of the Code;
(ii) to credit the deferrals to the Sub-
Account described in Section 3.4(a) at the times described therein.
(b) Deferral Period. The deferral election described in
Subsection (a) above shall also contain such Participant's election regarding
the time of the commencement of payment of his Excess 401(k) Sub-Account. In the
Deferral Election Form, such Participant may elect to commence payment of his
Excess 401(k)
<PAGE> 85
5
Sub-Account on (i) the date on which he ceases to be an Employee of a Controlled
Group Member, (ii) the date on which he attains an age specified in the Deferral
Election Form, or (iii) the earlier or later of such dates.
(c) Effect and Duration of Deferral Election. Any direction by
a 401(k) Employee who is a Participant in this Plan to make deferrals of Excess
401(k) Benefits hereunder shall be effective with respect to Compensation
otherwise payable to the Participant, and the Participant shall not be eligible
to receive such Excess 401(k) Benefits. Instead, such amounts shall be credited
to the Participant's Sub-Account as provided in Section 3.4(a). Any directions
made in accordance with Subsections (a) or (b) above shall be irrevocable and
shall remain in effect for subsequent Plan Years unless for subsequent Plan
Years the directions are changed or terminated by the Participant, on the
appropriate form provided by the Plan Administrator, prior to the first day of
such subsequent Plan Year. Notwithstanding the foregoing, a Participant's
direction to make deferrals of Excess 401(k) Benefits shall automatically
terminate on the earlier of the date on which (i) the Participant ceases
employment with the Company, (ii) the Company is deemed Insolvent, (iii) the
Participant is no longer eligible to make deferrals of Excess 401(k) Benefits
hereunder, or (iv) the Plan is terminated.
(d) Notwithstanding the foregoing, any Participant whose
eligibility to make Before-Tax Contributions to the Savings Plan has been
suspended because he has taken a hardship withdrawal from such 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.
SECTION 3.3. Excess Matching Benefits.
(a) In General. A 401(k) Participant shall have credited to
his Excess Matching Sub-Account an amount equal to the Post-1994 Matching
Employer Contributions 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 time specified in the Deferral Election
Form for the payment of the Excess 401(k) Benefits to which the Excess Matching
Benefits relate.
SECTION 3.4. Participant's 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 401(k) Sub-Account for the Excess
401(k) Benefits described in Section 3.2, which shall be
<PAGE> 86
6
credited to the Sub-Account when a Participant is prevented from making a
Before-Tax Contribution under the Savings Plan and credits to an Excess Matching
Sub-Account for the Excess Matching Benefits described in Section 3.3, which
shall be credited to the Sub-Account when a Participant is prevented from
receiving Post- 1994 Matching Employer Contributions under the Savings Plan.
(b) Credits to such Sub-Accounts for the earnings described in
Article IV, which shall continue until the vested portions of such Sub-Account
has been distributed to the Participant or his Beneficiary; and
(c) Debits for any distributions made from such Sub- Accounts.
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.
SECTION 3.5. 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. For Active 401(k) Employees.
(a) For purposes of determining the earnings to be credited to
401(k) Employee's Account, such Account shall be divided into two additional
Sub-Accounts, the "7% Sub-Account" and the "Additional Sub-Account." The 7%
Sub-Account shall contain Excess 401(k) Benefits and Excess Matching Benefits
attributable to amounts deferred by the 401(k) Employee of up to 7% of his
Compensation, plus any earnings attributable thereto. The Additional Sub-Account
shall contain the Excess 401(k) Benefits and Excess Matching Benefits
attributable to amounts deferred by the 401(k) Employee in excess of 7% of his
Compensation, plus any earnings attributable thereto.
(b) Except as provided in Section 4.2, at the end of each
calendar month during a Plan Year, the 7% Sub-Account of each 401(k) Employee
shall be credited with an amount determined by multiplying such Participant's
average 7% 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 Participant's 7% Sub-Account under the preceding
sentence, the Participant's 7% Sub-Account shall retroactively be credited with
the difference between (i) the
<PAGE> 87
7
amount determined under the preceding sentence, and (ii) the amount determined
by multiplying the Participant's average 7% Sub-Account balance during each
month of such Plan Year by the Adjusted ROE determined for such Plan Year,
compounded monthly.
(c) At the end of each calendar month during a Plan Year, the
Additional Sub-Account of each Participant shall be credited with an amount
determined by multiplying such Participant's average Additional Sub-Account
balance during such month by the blended rate earned during such month by the
Fixed Income Fund.
SECTION 4.2. For Terminated Employees. The Sub- Accounts of a
Participant who has terminated employment with the Controlled Group shall be
credited with earnings as described in Section 4.1, as modified by this Section
4.2, until each Sub- Account has been distributed in full. The Adjusted ROE
calculation described in the second sentence of Section 4.1(b) 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, the Adjusted ROE calculation described in the second sentence
of Section 4.1(b) shall not apply. The Fixed Income Fund calculation described
in the first sentence of Section 4.1(a) and in Section 4.1(c) 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 Earnings Assumptions. The Committee
(as defined in Section 9.5) may change the earnings rate credited to Accounts
hereunder at any time upon at least 30 days advance notice to Participants.
SECTION 4.4. Limitation on Earnings Assumption.
Notwithstanding any provision of the Plan to the contrary, in no
event will the earnings rate credited to Accounts hereunder
exceed 14%.
ARTICLE V
VESTING
A Participant shall not become vested in his Excess Pension
Benefit until he becomes vested in the Company-provided benefit under the Cash
Balance Plan and the Excess Pension Benefit of a Participant who is partially or
fully vested under the Cash Balance Plan shall at all times be vested hereunder
to the extent he is so vested. A Participant shall always be 100% vested in his
Excess 401(k) Benefit and Excess Matching Benefit hereunder. The non-vested
portion of an Excess Cash Balance Benefit shall be forfeited upon a
Participant's termination of employment with the Controlled Group in accordance
with the
<PAGE> 88
8
vesting, forfeiture and service rules contained in the Cash Balance Plan.
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 401(k) and Matching Benefits.
(i) Timing. A Participant's Account shall be
paid (or commence to be paid) to the Participant at the time specified in the
Participant's Deferral Election Form pursuant to Section 3.2(b).
(ii) Form. A Participant's Account shall be
distributed in the form of ten annual installments with each installment being
based on the value of the Participant's 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. Notwithstanding the
foregoing, the Participant may elect to receive his 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 while he is alive
and filed with the Plan Administrator at least one year prior to the time he had
elected to commence receiving payment of the portion his Account to which his
election applies. 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 a Participant and filed with the
Plan
<PAGE> 89
9
Administrator while such Participant is alive and at least one year prior to the
time he had elected to commence receiving payment of his Account.
(iii) 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 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.
(iv) Small Sub-Accounts. Notwithstanding the
foregoing, in the event that the Account of a Participant does not exceed $5,000
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 6.2. 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. 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 Pension
Benefits and/or his Account shall be his Beneficiary under the Cash Balance Plan
and the Savings Plan, respectively. 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.
<PAGE> 90
10
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.
(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 401(k) and 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 Account balance on the date of the
distribution of the Account 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.
<PAGE> 91
11
(ii) Excess 401(k) and Matching Benefits. The Excess
401(k) and Excess Matching Benefits 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 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
<PAGE> 92
12
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.
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 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 sole
and absolute 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 determine the rights and status under the Plan of Participants, or
other persons, to resolve 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 an Employee 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 Employee
or former Employee 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.
<PAGE> 93
13
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 Employee or former Employee to any Excess Retirement
Benefits hereunder. Any Employee or former Employee 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 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.
<PAGE> 94
14
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 Employee or former Employee
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 Nominating, Organization and
Compensation Committee of the Board of Directors of the Company (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
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
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 Committee, in its sole discretion, may terminate this
Plan at any time and for any reason whatsoever, except that (i) no such
termination may adversely affect any Participant's vested 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
<PAGE> 95
15
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 Committee.
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 18th day of December, 1995, to be effective
January 1, 1996.
HAMILTON BEACH/PROCTOR-SILEX, INC.
By: /s/ Richard E. Posey
--------------------
Title: President and Chief Executive
Officer
<PAGE> 96
THE HAMILTON BEACH/PROCTOR-SILEX, INC.
UNFUNDED BENEFIT PLAN
Notice of
Form of Benefit Payment
1. Election of Form of Benefit: Pursuant to the provisions of the
Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (the "Plan"), I hereby
elect that the portion of my Account attributable to my Excess 401(k) Benefit
and my Excess Matching Benefit be paid in one of the following forms: (Elect
One):
_______ A lump sum cash payment.
_______ Annual Installments over a period of _______
Years (must not exceed 9).
I understand that if I fail to make an election or if my election is for any
reason not effective, the portion of my Account attributable to my Excess 401(k)
Benefit and my Excess Matching Benefit will automatically be paid in the form of
annual installments for a period of 10 years.
2. Effective Date: I understand that in order for this election to
be effective, it must be received by the Plan Administrator at least one year
prior to the date on which I elected to commerce payment of the portion of my
Account attributable to my Excess 401(k) Benefit and my Excess Matching Benefit.
3. Acknowledgement: I acknowledge that I have reviewed the Plan and
understand that my election will be subject to the terms and conditions
contained in the Plan. I understand
<PAGE> 97
that I may change this election by filing a new election form with my Employer
at least one year prior to the date on which I elected to commence payment of
the portion of my Account attributable to my Excess 401(k) Benefit and my Excess
Matching Benefit.
4. Construction: Terms used in this Notice of Election with initial
capital letters that are defined in the Plan shall have the meanings set forth
in the Plan unless a different meaning is clearly required by the context.
Executed this ____ day of ___________________________, 19 ___.
_____________________________________
Signature
_____________________________________
Print or Type Name
Received by Employer:
_____________________________________
Signature
_____________________________________
Date
<PAGE> 98
EXHIBIT 10(cv)
HAMILTON BEACH/PROCTOR-SILEX, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
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.
PLAN OBJECTIVES
The Company desires to attract and retain talented employees to enable the
company to meet its financial and business objectives. The objectives 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
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
<PAGE> 99
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 recommendations 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 Job
Grade. This percentage is multiplied by the midpoint of the participant's
Salary Job 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 (the
"Target Pool"). The Target Pool is approved each year by the Committee.
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 factor 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 it 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 as salespersons,
regional general manager and manufacturing representatives.
DETERMINATION OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS
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
approve 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.
<PAGE> 100
EXHIBIT 10(cxiii)
WAIVER AGREEMENT
WAIVER AGREEMENT dated as of January 12, 1996 between Hamilton
Beach*Proctor-Silex, Inc. (the "Company"), Proctor-Silex Canada Inc.("PSC"),
each other Obligor, The Chase Manhattan Bank (National Association), as U.S.
Agent under the Credit Agreement referred to below (the "U.S. Agent"), and The
Chase Manhattan Bank of Canada, as Canadian Agent under the Credit Agreement
referred to below (the "Canadian Agent", and together with the U.S. Agent, the
"Agents").
Reference is made to the Second Amended and Restated Credit Agreement
dated as of October 11,1990, amended and restated as of April 18, 1995 (as
amended, supplemented and otherwise modified and in effect from time to time,
the "Credit Agreement") among the Company, PSC, certain banks (the "Banks") and
the Agents. Capitalized terms used herein and not otherwise defined herein
have the meanings given to such terms in the Credit Agreement.
The Company, PSC and PSM have informed the Agents that the Company has
formed a new subsidiary, HBPS El Paso, Inc., incorporated in the State of
Delaware ("HBPS"), that has acquired certain assets of Southern Tech Plastics
Products, Inc., including the stock of Plasticos SoTec SA de C.V., a Mexican
company ("SoTec"). By definition, HBPS will be a Material Subsidiary for
purposes of the Credit Agreement. Pursuant to Section 9.27(a) of the
Agreement, the Company must pledge to the U.S. Agent, for the benefit of the
Banks, 100% of its interest in HBPS, and, pursuant to Section 9.27(b) of the
Credit Agreement, HBPS must become a Guarantor. Section 9.27(b) of the Credit
Agreement also requires HBPS to grant to the U.S. Agent, a Lien upon all of its
assets, including 66% of its interest in SoTec.
The Company, PSC and PSM have requested that the Agents (acting with
the consent of the Majority Banks) waive the requirements of Section 9.27(b)
solely with respect to the grant by HBPS to the U.S. Agent of a Lien upon its
assets, other than 66% of the stock of SoTec which will be pledged.
Accordingly, the parties hereto agree as follows:
Section 1. WAIVER. Upon the execution and delivery hereof by the
Company, PSC, PSM and each Obligor, the Agents (acting with the consent of the
Majority Banks) hereby waive the requirements of Section 9.27(b) solely with
respect to the grant by HBPS to the U.S. Agent of a Lien upon its assets, other
than 66% of the stock of SoTec which will be pledged.
Section 2. CREDIT AGREEMENT OTHERWISE UNCHANGED. Except as herein
provided, the Credit Agreement shall remain unchanged and in full force and
effect.
Section 3. COUNTERPARTS. This waiver Agreement may be executed in any
number of counterparts, each of which shall be identical and all of which, when
taken together, shall constitute on and the same instrument, and any of the
parties hereto may execute this Waiver Agreement by signing any such
counterpart.
Section 4. GOVERNING LAW. This Waiver Agreement shall be governed by,
and construed in accordance with, the law of the State of New York.
<PAGE> 101
IN WITNESS WHEREOF, the parties hereto have caused this Waiver Agreement to be
duly executed as of the day and year first above written.
HAMILTON BEACH/PROCTOR-SILEX, INC.
By /s/ James H. Taylor
-------------------------------------
Title: Vice President, Treasurer
PROCTOR-SILEX CANADA INC.
By /s/ James H. Taylor
-------------------------------------
Title: Treasurer
PROCTOR-SILEX S.A. DE C.V.
By /s/ James H. Taylor
-------------------------------------
Title: Sole Administrator
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as U.S. Agent
By /s/ Carol A. Ulmer
-------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK
OF CANADA, as Canadian Agent
By /s/ Tim Wilson
-------------------------------------
Title: Vice President
<PAGE> 102
EXHIBIT 10(cxiv)
HAMILTON BEACH/PROCTOR-SILEX, INC.
PROCTOR-SILEX CANADA INC.
as Borrowers
---------------------
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 11, 1990
Amended and Restated as of April 18, 1995
---------------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
as U.S. Agent
THE CHASE MANHATTAN BANK OF CANADA
as Canadian Agent
<PAGE> 103
<TABLE>
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TABLE OF CONTENTS
Page
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RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 1. DEFINITIONS AND ACCOUNTING AND COMPUTATIONAL
MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.02 Accounting Terms and Determination; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.03 Certain Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 2. COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.01 Extensions of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.02 Borrowings of Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.03 Changes of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.04 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.05 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.06 Several Obligations; Remedies Independent . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.08 Conversion or Continuation of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.09 Extension of Revolving Credit Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 3. REPAYMENT OF PRINCIPAL; INTEREST; PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . .
3.01 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.03 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 4. PAYMENTS; PRO RATA TREATMENT;
COMPUTATIONS; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.03 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.06 Non-Receipt of Funds by the Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.07 Sharing of Payments; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 5. YIELD PROTECTION; ILLEGALITY; FOREIGN TAXES . . . . . . . . . . . . . . . . . . . . . . . . . .
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5.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.02 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.04 Certain Conversions Pursuant to Sections 5.01
and 5.03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.05 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.06 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 6. GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.01 Unconditional Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.02 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.03 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.04 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.05 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.06 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.07 Joint and Several Obligations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.08 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 7. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.01 Amendment Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.02 [Intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.03 Initial and All Subsequent Extensions of Credit . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.01 Corporate and Legal Existence and Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.02 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.05 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.06 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.07 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.10 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.11 Subsidiaries, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.12 Legal Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.13 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.14 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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8.15 Public Utility Holding Company Act; Investment
Company Act . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .
8.16 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.17 Product Recall Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 9. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.01 Financial Statements and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.02 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.03 Corporate Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.04 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.05 [Intentionally omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.06 [Intentionally omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.07 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.08 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.09 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.10 Independent Obligations of PSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.11 [Intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.12 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.13 Limitation on Consolidation, Merger,
Acquisitions and Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.14 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.16 Majority Interest Debt and Minority Interest
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.17 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.18 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.19 [Intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.20 Type of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.21 Hedging Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.23 Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.24 Certain Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.25 [Intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.26 Subsidiary Dividend Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.27 Material Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.28 [Intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 10. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 11. THE AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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11.01 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.02 Reliance by Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.04 Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.06 Non-Reliance on Agents and other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.07 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.08 Resignation or Removal of Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.01 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.03 Expenses; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.04 Amendments; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.06 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.11 Jurisdiction and Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.12 Waiver of Sovereign Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.13 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.14 Acknowledgment of Legal Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.16 WAIVER OF TRIAL BY JURY . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SCHEDULES AND EXHIBITS
----------------------
[Schedules and Exhibits not attached to this
document are the Schedules and Exhibits attached to
the Original Credit Agreement referred to below]
Schedule I - List of Commitments and Applicable Lending
Offices
Schedule II - List of Subsidiaries
Schedule III - List of Certain Agreements
Schedule IV - List of Existing Liens
Schedule V - List of Inventory
Schedule VI - Litigation
Schedule VII - [Intentionally omitted]
Schedule VIII - List of Product Recall Events
Schedule IX - [Intentionally omitted]
Schedule X - Hazardous Materials
Schedule XI - Consents
EXHIBIT A-1 - Form of Money Market Note
EXHIBIT A-2 - Form of Series A R/C Note
EXHIBIT A-3 - Form of Series B R/C Note
EXHIBIT A-4 - Form of Letter of Credit Note
EXHIBIT B-1 - Forms of Pledge Agreements
EXHIBIT B-2 - Form of U.S. Security Agreement
EXHIBIT B-3 - Form of U.S. Patents Assignment
EXHIBIT B-4 - Form of Government Contract Assignment
EXHIBIT B-5 - Form of Mortgage/Leasehold Mortgage
EXHIBIT B-6 - Form of Mortgage Amendment
EXHIBIT C-1 - Form of Section 178 Assignment
EXHIBIT C-2 - Form of General Security Agreement
EXHIBIT C-3 - Form of Renewal Agreement
[Quebec]
EXHIBIT C-4 - Form of General Assignment of Book Debts
[British Columbia]
EXHIBIT C-5 - Form of Undertaking Re: Location of Accounts
Receivable
EXHIBIT D-1 - Form of NACCO Supplemental Agreement
EXHIBIT D-2 - Form of Housewares Supplemental Agreement
EXHIBIT D-3 - Form of Glen Dimplex Supplemental Agreement
EXHIBIT D-4 - Form of Glen Electric Supplemental Agreement
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EXHIBIT D-5 - Form of Precis Supplemental Agreement
EXHIBIT D-6 - Form of Holdings Supplemental Agreement
EXHIBIT D-7 - Forms of Affiliate Supplemental Agreements
EXHIBIT D-8 - Form of Housewares Pledge Agreement
EXHIBIT D-9 - Form of Precis Pledge Agreement
EXHIBIT D-10 - Form of Holdings Pledge Agreement
EXHIBIT D-11 - Form of Precis Override Agreement
EXHIBIT D-12 - Form of Override Agreement
EXHIBIT E - Form of Process Agent Letter
EXHIBIT F - Form of Acknowledgement Letter
EXHIBIT G - Form of Compliance Certificate
EXHIBIT H-1 - Form of Money Market Quote Request
EXHIBIT H-2 - Form of Money Market Quote
EXHIBIT I-1 - [Intentionally omitted]
EXHIBIT I-2 - [Intentionally omitted]
EXHIBIT I-3 - [Intentionally omitted]
EXHIBIT I-4 - [Intentionally omitted]
EXHIBIT I-5 - [Intentionally omitted]
EXHIBIT I-6 - Form of Opinion of Counsel to PSC
EXHIBIT I-7 - [Intentionally omitted]
EXHIBIT I-8 - [Intentionally omitted]
EXHIBIT I-9 - Form of Opinion of General Counsel of the
Company
EXHIBIT J - [Intentionally omitted]
EXHIBIT K - Form of Opinion of Special New York Counsel
to the Banks and the Agents
EXHIBIT L - Form of Reconciliation Statement
EXHIBIT M - Form of Parent Advance Statement
EXHIBIT N - [Intentionally omitted]
(vi)
<PAGE> 109
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. (the "COMPANY"), a corporation duly organized and validly existing under
the laws of the State of Delaware; PROCTOR-SILEX CANADA INC. ("PSC"), a
corporation duly organized and validly existing under the laws of the Province
of Ontario, Canada, and a Wholly-Owned Subsidiary (as hereinafter defined) of
the Company; PROCTOR-SILEX S.A. DE C.V. ("PSM"), a corporation duly organized
and validly existing under the laws of Mexico and a 99.2%-owned Subsidiary (as
hereinafter defined) of the Company; each of the banks or other financial
institutions that is a signatory hereto (individually, a "Bank" and,
collectively, the "BANKS"); THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as
United States agent for the Banks (such agent in such capacity, together with
its successors in such capacity, the "U.S. AGENT") and THE CHASE MANHATTAN
BANK OF CANADA, as Canadian agent for the Banks (such agent in such capacity,
together with its successors in such capacity, the "CANADIAN AGENT" and,
together with the U.S. Agent, the "AGENTS").
The Company, PSC, PSM, the Banks and the Agents are party to an Amended and
Restated Credit Agreement dated as of October 11, 1990 and amended and restated
as of May 10, 1994 (as in effect immediately prior to the Amendment Effective
Date referred to below, the "ORIGINAL CREDIT AGREEMENT"). The Company, PSC and
PSM have requested that the Banks and the Agents agree to amend and restate the
Original Credit Agreement, and the Banks and the Agents are willing to amend
and restate the Original Credit Agreement, all on the terms and conditions
hereinafter set forth.
Accordingly, the parties hereto agree to amend and restate the Original
Credit Agreement so that, as amended and restated, it reads, subject to Section
1.01 hereof, in its entirety as provided herein.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 110
- 2 -
Section 1. DEFINITIONS AND ACCOUNTING AND COMPUTATIONAL MATTERS.
----------------------------------------------------
1.01 Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when
used in the plural and vice versa):
"ACQUISITION" shall mean any transaction, or any series of
related transactions, consummated after the date of this Agreement, by
which the Company and/or any of the Subsidiaries (i) acquires any going
business or all or substantially all of the assets of any firm,
corporation or division thereof, whether through purchase of assets,
merger or otherwise; (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of
transactions) control of at least a majority (in number of votes) of
the securities of a corporation which have ordinary voting power for
the election of directors; or (iii) directly or indirectly acquires
control of a 5% or more partnership or other ownership interest in any
partnership, joint venture or joint adventure.
"ACQUISITION PERIOD" shall mean, with respect to each fiscal
year of the Company commencing with the fiscal year of the Company
ending December 31, 1995, the period from and including the first day
of the Restricted Payments Period occurring in such fiscal year to but
excluding the first day of the Restricted Payment Period occurring in
the fiscal year of the Company immediately following such fiscal year.
"ADDITIONAL SUPPLEMENTAL AGREEMENTS" shall have the meaning
assigned to that term in Section 1 of the Override Agreement.
"ADDITIONAL SUPPLEMENTAL SECURITY DOCUMENTS" SHALL HAVE THE
meaning assigned to that term in Section 1 of the Override Agreement.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 111
- 3 -
"ADJUSTED CASH FLOW" shall mean, for any period, for any Person
and its Subsidiaries the amount equal to: (i) Cash Flow for such
period MINUS (ii) depreciation for such period determined on a
consolidated basis in accordance with GAAP.
"AFFILIATe" shall mean, with respect to any Person, any other
Person or group of affiliated Persons directly or indirectly
controlling (including, without limitation, all directors and officers
of such Person), controlled by or under direct or indirect common
control with such Person. A Person shall be deemed to control a
corporation for purposes of this definition if such Person possesses,
directly or indirectly, the power (i) to vote 10% or more of the
securities having ordinary voting power for the election of directors
of such corporation or (ii) to direct or cause the direction of the
management or policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise, provided
that, in any event, any Person which owns directly or indirectly 10% or
more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of
the partnership or other ownership interests of any other Person (other
than as a limited partner of such other Person) will be deemed to
control such corporation or other Person. Notwithstanding the
foregoing: (a) no individual shall be deemed to be an Affiliate of a
Person solely by reason of his or her being an officer or director of
such Person and (b) the Company and the Subsidiaries shall be deemed
not to be Affiliates of each other.
"AFFILIATE SUPPLEMENTAL AGREEMENT" shall mean an Agreement in
substantially the form of Exhibits D-7-1 or D-7-2 hereto, as
applicable, entered into by a Subsidiary of a Majority Interest Party
or a Minority Interest Party, as at any time amended or otherwise
modified.
"AGGREGATE OUTSTANDING OBLIGATIONS" shall mean the sum of (1)
the aggregate principal amount of all Revolving Credit Loans PLUS (2)
the aggregate amount of all
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 112
- 4 -
Outstanding Letter of Credit Liabilities of all of the Banks PLUS (3)
the aggregate principal amount of all Money Market Loans.
"AMENDMENT EFFECTIVE DATE" shall mean the date on which all of
the conditions set forth in Section 7 hereof shall have been satisfied
or waived by the Banks and the Agents.
"APPLICABLE LENDING OFFICE" shall mean, for each Bank and for
each type of Loan or participations in Letter of Credit Liabilities,
the Lending Office of such Bank designated for such type of Loan or
participations in Letter of Credit Liabilities on Schedule I hereto or
such other office of such Bank as such Bank may from time to time
specify to the Agents and the Company as the office at which its Loans
of such type or participations in Letter of Credit Liabilities are to
be made and maintained.
"APPLICABLE MARGIN" shall mean, with respect to each type of
Loan, letter of credit fees and facility fees, for the fiscal quarter
commencing immediately following the delivery of a Compliance
Certificate pursuant to the last sentence of Section 9.01 hereof, the
percentage per annum set forth in the schedule immediately below
opposite the Interest Coverage Ratio as at the last day of the
Computation Period of the Company covered by such Compliance
Certificate:
I. Loans
<TABLE>
<CAPTION>
Applicable Margin
Canadian Canadian
Interest Base Rate Floating Eurodollar Discount
Coverage Ratio Loans Rate Loans Loans Rate Loans
-------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Level I Period .00% 0.00% 0.2750% .2750%
Level II Period .00% 0.00% 0.3125% .3125%
Level III Period .00% 0.00% 0.3750% .3750%
Level IV Period .00% 0.00% 0.4375% .4375%
Level V Period .00% 0.00% 0.6250% .6250%
</TABLE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 113
- 5 -
[S] [C] [C] [C] [C]
Level VI Period .25% 0.25% 0.7500% .7500%
II. Fees
----
<TABLE>
<CAPTION>
Interest Letter of Facility
Coverage Ratio Credit Fees Fees
-------------- ----------- ----------
<S> <C> <C>
Level I Period .1500% .1500%
Level II Period .1875% .1875%
Level III Period .2500% .2500%
Level IV Period .2500% .3125%
Level V Period .2500% .3750%
Level VI Period .2500% .5000%
</TABLE>
provided that, if the Company shall fail to deliver the financial statements and
the accompanying Compliance Certificate within the time periods specified in
Section 9.01 hereof, the Applicable Margin shall be at the numerical Level one
higher than the current Level (or, if the current Level is Level VI Period,
Level VI Period) for the fiscal quarter commencing immediately following the
date by which such Compliance Certificate should have been so delivered. Prior
to the delivery of the first Compliance Certificate required to be delivered
after the Amendment Effective Date pursuant to the last paragraph of Section
9.01 hereof, the Applicable Margin shall be determined by reference to the
Compliance Certificate delivered pursuant to Section 7.01(e)(ii) hereof.
"APPLICATION" shall mean, with respect to Casualty Insurance Proceeds or
Disposition Proceeds, for any Computation Period, the application thereof by the
Company or the Subsidiary receiving such Casualty Insurance Proceeds or
Disposition Proceeds (by payment during such Computation Period or execution of
a bona fide contract during such Computation Period which may provide for
payment in the future) to the purchase price of an asset intended to replace, or
(in the case of Casualty Insurance Proceeds only) to the repair of, the asset to
which such Casualty
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 114
- 6 -
Insurance Proceeds or Disposition Proceeds relate. The verb "Apply" shall have
a correlative meaning.
"BANK FINANCIAL ACCOMMODATIONS" shall mean (i) Bank Letters of Credit;
(ii) Bank Line Loans; (iii) Interest Rate Protection Arrangements between the
Company and any Bank; and (iv) Foreign Currency Hedging Arrangements between the
Company and any Bank.
"BANK FINANCIAL ACCOMMODATION DOCUMENTS" shall mean (i) Bank Letter of
Credit Documents; (ii) Bank Line Loan Documents; (iii) Interest Rate Protection
Agreements between the Company and any Bank relating to Interest Rate Protection
Arrangements; and (iv) Foreign Currency Hedging Agreements between the Company
and any Bank.
"BANK LETTER OF CREDIT DOCUMENTS" shall mean, with rsspect to any Bank
Letter of Credit, collectively, such Bank Letter of Credit, any amendments
thereto, any documents delivered thereunder, any application therefor and any
other agreements, instruments, guarantees and other documents (whether general
in application or applicable solely to such Bank Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned or at risk
or (ii) any collateral security for such obligations permitted by Section
9.14(l) hereof.
"BANK LETTER OF CREDIT LIABILITIES" shall mean, at any time, the sum
(determined without duplication) of (i) the aggregate outstanding and undrawn
maximum face amount of all Bank Letters of Credit PLUS (ii) Bank Letter of
Credit Reimbursement Obligations.
"BANK LETTER OF CREDIT OBLIGATIONS" shall mean, at any time, with
respect to any Bank Letter of Credit, Bank Letter of Credit Reimbursement
Obligations relating thereto, interest on such Bank Letter of Credit
Reimbursement Obligations and all other amounts payable with respect to such
Bank Letter of Credit in accordance with the related Bank Letter of Credit
Documents.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 115
- 7 -
"BANK LETTER OF CREDIT REIMBURSEMENT OBLIGATIONS" shall mean, at any
time, the obligations of the Company then outstanding in respect of Bank Letters
of Credit to reimburse the Bank or Banks that issued such Bank Letters of Credit
for the amount paid thereby in respect of a drawing or drawings under such Bank
Letters of Credit.
"BANK LETTERS OF CREDIT" shall mean stand-by or performance or trade
letters of credit issued by any Bank (other than Letters of Credit issued by the
Issuing Bank), and any acceptances created thereunder, for the account of the
Company that (i) expire or mature prior to the Revolving Credit Termination
Date; (ii) have an original stated face amount not exceeding U.S.$3,000,000; and
(iii) shall be for the purpose of financing purchases of raw materials, finished
goods or supplies in the ordinary course of business of the Company and the
Subsidiaries or for the purpose of supporting obligations in connection with
workmen's compensation obligations of the Company and the Subsidiaries,
obligations with respect to insurance programs of the Company and the
Subsidiaries and obligations with respect to bid bonds, performance bonds or
surety bonds of the Company and the Subsidiaries furnished in the ordinary
course of business of the Company and the Subsidiaries. For purposes of this
Agreement, "Bank Letters of Credit" shall (i) include any stand-by or
performance or trade letter of credit issued by a Bank (other than the Issuing
Bank), and any acceptances created thereunder outstanding on the Closing Date
and (ii) exclude any stand-by or performance or trade letter of credit, and any
acceptances created thereunder (including, without limitation, any stand-by or
performance or trade letter of credit, and any acceptances created thereunder,
referred to in clause (i) above in this sentence) issued by any Bank (other than
the Issuing Bank) that is the beneficiary of a Letter of Credit in respect of
such stand-by or performance or trade letter of credit, and any acceptances
created thereunder.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 116
- 8 -
"BANK LINE LOAN DOCUMENTS" shall mean, with respect to any Bank Line
Loan, collectively, the agreement governing such Bank Line Loan, any amendments
thereto, any documents delivered thereunder, any promissory note evidencing such
Bank Line Loan and any other agreements, instruments, guarantees and other
documents (whether general in application or applicable solely to such Bank Line
Loan) governing or providing for the rights and obligations of the parties
concerned or at risk.
"BANK LINE LOANS" shall mean loans by any Bank to the Company that (i)
are governed by Bank Line Loan Documents that contain covenants and default
provisions that are no more onerous than the covenants and default provisions
set forth in the Documents (except that such Bank Line Loans may be payable on
demand), (ii) are unsecured except pursuant to the Security Documents and the
Supplemental Security Documents and except to the extent that bank accounts
maintained by the Company with such Bank that are subject to set-off,
counterclaim or bankers' liens or similar rights constitute security and (iii)
do not constitute Funded Debt.
"BANKERS ACCEPTANCES" shall mean bankers acceptances drawn by third
parties and accepted by the Canadian Reference Bank for terms of 30, 60, 90 or
180 days, as the case may be.
"BASE RATE" shall mean, with respect to any Base Rate Loan, for any day,
the higher of (i) the Federal Funds Rate for such day PLUS 1/2 of 1% per annum
or (ii) the Prime Rate for such day. Each change in any interest rate provided
for herein based upon the Base Rate resulting from a change in the Base Rate (or
any component thereof) shall take effect at the time of such change in the Base
Rate.
"BASE RATE LOANS" shall mean Revolving Credit Loans which, at the time,
pursuant to the terms of this Agreement, bear interest at rates based upon the
Base Rate.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 117
- 9 -
"BASLE ACCORD" shall mean the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, modified or
supplemented and in effect from time to time or any replacement thereof.
"BOND LETTERS OF CREDIT" shall mean any performance letter of credit in
the form customarily used by the Issuing Bank at the time for transactions of
the type involved issued by the Issuing Bank for the account of the Company that
meets the requirements set forth in Section 2.01(II) hereof (including, without
limitation, Section 2.01(II)(a) hereof).
"BORROWERS" shall mean the Company and PSC.
"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in New York, New York and with respect to
Canadian Dollar Loans, Toronto, Ontario, Canada and, with respect to the giving
of notices or quotes in connection with a LIBOR Auction or to a borrowing of, a
payment or prepayment of principal of or interest on, or a Conversion or
Continuation of or into, or an Interest Period for, a Eurodollar Loan or a LIBOR
Market Loan, or a notice by the Company with respect to any of the foregoing,
which is also a day on which dealings in U.S. Dollar deposits are carried out in
the London interbank market and, with respect to determinations of the Canadian
Dollar Spot Rate and the U.S. Dollar Spot Rate, which is also a day on which
dealings in foreign currency are carried out in the London foreign exchange
market.
"CANADIAN CASH COLLATERAL ACCOUNT" shall have the meaning assigned to
that term in Section 2.10 of the General Security Agreement referred to in
clause (ii) of the definition of "Canadian Security Documents" in this Section
1.01.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 118
- 10 -
"CANADIAN DISCOUNT RATE" shall mean, with respect to Canadian Discount
Rate Loans, the discount rate (expressed as a percentage calculated on the basis
of a year of 365 days) quoted by the Toronto office of the Canadian Reference
Bank at 10:00 a.m. (Toronto time) on the Canadian Discount Borrowing Date as the
discount rate the Canadian Reference Bank would, in the normal course of its
business, purchase on such date Bankers Acceptances having a term comparable to
the Interest Period for such Canadian Discount Rate Loan and having an aggregate
face amount equal to CAN$1,000,000.
"CANADIAN DISCOUNT RATE LOANS" shall mean Loans the interest rates on
which are at the time determined on the basis of the Canadian Discount Rate.
"CANADIAN DISCOUNT BORROWING DATE" shall mean the date of borrowing of
Canadian Discount Rate Loans designated by the Borrower pursuant to Section 4.05
hereof.
"CANADIAN DOLLAR BANKS" shall mean those Banks listed on Schedule I
hereto under the heading "Canadian Dollar Banks" and any other Bank that may
from time to time hold Canadian Dollar Loans.
"CANADIAN DOLLAR EQUIVALENT" shall mean, on any day, and with respect to
any amount of U.S. Dollars, the amount of Canadian Dollars purchasable with such
amount of U.S. Dollars for delivery on such day, at the Canadian Dollar Spot
Rate in effect two Business Days before such day.
"CANADIAN DOLLAR LOANS" shall have the meaning assigned to that term in
Section 2.01(I)(b)(ii).
"CANADIAN DOLLAR SPOT RATE" shall mean, on any day, the rate of exchange
for the purchase by the London Branch of Canadian Dollars with U.S. Dollars in
the commercial bank foreign exchange market in London for delivery two Business
Days after such day, quoted by the London Branch at approximately 4:00 p.m.
London time on such day (or the next preceding Business Day, if such day is not
a Business Day).
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 119
- 11 -
"CANADIAN DOLLARS" and "CAN$" shall mean lawful money of Canada.
"CANADIAN FLOATING RATE" shall mean, with respect to any Canadian Dollar
Loan, for any day, the rate of interest from time to time announced by Chase
Canada at the Canadian Office as its prime commercial lending rate for such
day. Each change in any interest rate provided for herein based upon the
Canadian Floating Rate shall take effect at the time of such change in the
Canadian Floating Rate.
"CANADIAN FLOATING RATE LOAN" shall mean Canadian Dollar Loans, the
interest rates on which are at the time determined on the basis of the Canadian
Floating Rate.
"CANADIAN OFFICE" shall mean the principal Toronto office of the
Canadian Agent and Chase Canada, presently located at 150 King Street West,
Toronto, Ontario M5H 1J9, Canada.
"CANADIAN REFERENCE BANK" shall mean Chase Canada.
"CANADIAN SECURITY DOCUMENTS" shall mean (i) a General Assignment under
Section 427 of the Bank Act (Canada) (formerly Section 178(1)(a), (b), (c) or
(e) of the Bank Act (Canada)) in substantially the form of Exhibit C-1 hereto;
(ii) a General Security Agreement in substantially the form of Exhibit C-2,
hereto; (iii) a General Assignment for Quebec; (iv) a General Assignment of Book
Debts for the Province of British Columbia in substantially the form of Exhibit
C-4 hereto; and (v) an Undertaking with respect to the location of accounts
receivable in substantially the form of Exhibit C-5 hereto, each entered into by
PSC, as each may at any time be amended or otherwise modified.
"CAPITAL EXPENDITURES" shall mean expenditures for fixed assets, plant
and equipment (including renewals, improvements and replacements, but excluding
repairs) and
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 120
- 12 -
any such other expenditures required to be capitalized under GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"CASH COLLATERAL ACCOUNT" shall have the meaning assigned to that term
in Section 4.C of the Security Agreement.
"CASH FLOW" shall mean, for any period, the sum of the following for any
Person and its Subsidiaries (if any) determined on a consolidated basis in
accordance with GAAP: (i) income before taxes for such period MINUS (ii) equity
earnings of unconsolidated Subsidiaries and Affiliates for such period (or PLUS
equity losses of unconsolidated Subsidiaries and Affiliates for such period, as
the case may be) PLUS (iii) to the extent not included in clause (vi) below, the
amount by which (x) non-cash charges in connection with transactions involving
charges to income of $1,000,000 or more in any individual transaction and
classified as long-term deferrals in accordance with GAAP for such period exceed
(y) cash charges for such period relating to non-cash charges of the type
referred to in clause (iii)(x) of this definition and included in the
computation of "Cash Flow" for any previous period (or MINUS the amount by which
the cash charges described in the immediately preceding clause (iii)(y) exceed
the non-cash charges described in the immediately preceding clause (iii)(x))
PLUS (iv) Interest Expense for such period PLUS (v) depreciation and
amortization for such period PLUS (vi) with respect to any period that "Cash
Flow" is computed by reference to financial statements relating to any fiscal
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 121
- 13 -
period ending on or before December 31, 1993, the amount specified opposite
"Other, Net Items" on the financial statements of such Person and its
Subsidiaries.
"CASUALTY INSURANCE PROCEEDS" shall mean, with respect to any fixed
assets, plant or equipment of the Company or any Subsidiary, casualty insurance
proceeds received by the Company or such Subsidiary in connection with damage
to, or destruction of, the same.
"CERCLA" shall have the meaning assigned to that term in Section 8.16
hereof.
"CERCLIS" shall have the meaning assigned to that term in Section 8.16
hereof.
"CHASE" shall mean The Chase Manhattan Bank (National Association).
"CHASE CANADA" shall mean The Chase Manhattan Bank of Canada.
"CLEAN-DOWN LIMIT" shall mean, with respect to each day of any
Clean-Down Period, the excess (if any) of (i) (a) U.S.$80,000,000 (for the
Initial Clean-Down Period) and $75,000,000 (for each subsequent Clean-Down
Period) PLUS (b) the amount of the Holdings Dividend OVER (ii) the sum of (a)
the aggregate amount of the reductions in excess of $5,000,000 of the Revolving
Credit Commitments pursuant to Section 2.03 hereof PLUS (b) the aggregate amount
of the reductions of the Revolving Credit Commitments pursuant to Section
3.03(c) hereof.
"CLEAN-DOWN PARENT ADVANCES" shall mean, with respect to each day of any
Clean-Down Period, the amount of Parent Advances equal to (i) the amount of (a)
the outstanding principal amount of the Revolving Credit Loans on such day PLUS
(b) the outstanding principal amount of the Parent Advances on such day MINUS
(ii) the amount of the Clean-Down Limit in effect on such day.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 122
- 14 -
"CLEAN-DOWN PERIOD" shall mean a period of 30 consecutive days
commencing on any day during (i) the first fiscal quarter in the fiscal year of
the Company ending December 31, 1995 (the "INITIAL CLEAN-DOWN PERIOD") and (ii)
the first fiscal quarter in each fiscal year of the Company thereafter, in each
case as specified by the Company in writing to the Agents and the Banks;
provided that the last day of the Clean- Down Period must occur prior to the
last Business Day of such first fiscal quarter.
"CLOSING DATE" shall mean October 11, 1990.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMERCIAL LETTERS OF CREDIT" shall mean any sight or standby letter of
credit in the form customarily used by the Issuing Bank at the time for
transactions of the type involved issued by the Issuing Bank for the account of
the Company that meets the requirements set forth in Section 2.01(II) hereof
(including, without limitation, Section 2.01(II)(a) hereof).
"COMPLIANCE CERTIFICATE" shall have the meaning assigned to that term in
the last paragraph of Section 9.01 hereof.
"COMPUTATION PERIOD" shall mean the period of four consecutive complete
fiscal quarters of the Company ending on, or most recently ended prior to, any
date of determination.
"CONFIRMATION AGREEMENT" shall mean the Confirmation Agreement dated as
of May 10, 1994 among the Company, Housewares, Precis, Holdings, PSC, NACCO,
Glen Dimplex, Glen Electric, the Agents and the Canadian Dollar Banks, in
substantially the form of Exhibit N hereto, as the same may be amended,
supplemented and in effect from time to time.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 123
- 15 -
"CONTINGENT EVENT" shall mean that the following event shall occur and
be continuing: Net Worth of the Company shall not exceed the level therefor
established in Section 9.09 hereof by more than U.S.$100,000 AND the Company (or
NACCO) shall have obtained a ruling from the Internal Revenue Service to the
effect that (or Section 956 of the Code (or the regulations thereunder) shall be
modified with the effect that) neither PSC nor PSM will, as a result of its
agreement to undertake the obligations set forth in Section 6.01(a) hereof
(without regard to Section 6.01(b) hereof), be considered to hold or to have
acquired any obligation of a United States person within the meaning of Section
956(c) of the Code, until such time, if ever, as the Net Worth of the Company
shall not exceed the level therefor established in Section 9.09 hereof by more
than U.S.$100,000.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation of a Eurodollar Loan or Canadian Discount Rate Loan from one
Interest Period to the next Interest Period.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.08 hereof of Revolving Credit Loans of one type into
Revolving Credit Loans of another type, which may be accompanied by the transfer
by a Bank (in its sole discretion) of the booking location of a Revolving Credit
Loan from one Applicable Lending Office to another.
"CORPORATION" shall mean (i) any Obligor and any Subsidiary of any
Obligor and (ii) NACCO.
"CPSC" shall mean the United States Consumer Product Safety Commission
or any successor thereto.
"DATE OF THIS AGREEMENT" and "DATE HEREOF" shall mean October 11, 1990.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 124
- 16 -
"DEBT SERVICE" shall mean, for any period, the sum of (i) all Interest
Expense of the Company for such period PLUS (ii) all payments of principal of
Funded Debt (including, without limitation, the Loans) required to be made
during such period (determined on a consolidated basis for the Company and the
Subsidiaries in accordance with GAAP) and which cannot be reborrowed (as Loans
of the same type or Series in the case of Loans) under the governing instruments
with respect to such Indebtedness (including, without limitation, imputed
principal payments on Capital Lease Obligations determined in accordance with
GAAP and prepayments required to be made in conjunction with a regularly
scheduled reduction in a creditor's commitment to lend).
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"DISPOSITION PROCEEDS" shall mean, with respect to any asset Disposed of
by the Company or any Subsidiary (other than Dispositions permitted by Section
9.13(c) hereof), cash proceeds received by the Company or such Subsidiary (net
of expenses and taxes directly attributable to such Disposition borne by the
Company or such Subsidiary).
"DISPOSITIONS" shall mean any sale, assignment, lease, transfer or other
disposition of any asset of the Company or a Subsidiary (other than Inventory in
the ordinary course of business). The verb "Dispose" shall have a correlative
meaning.
"DOCUMENTS" shall mean, collectively, this Agreement, the Notes, the
Security Documents, the Letter of Credit Documents, the Holdings Documents, the
Majority Interest Documents, the Minority Interest Documents and each of the
other agreements, instruments or documents contemplated by or referred to in
this Agreement.
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"ENVIRONMENTAL LAW" means any and all federal, state, provincial, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
guidelines, decrees, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the environment or the
release of any materials into the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" shall mean, with respect to any Person, any
corporation or trade or business which is a member of the same controlled group
of corporations (within the meaning of Section 414(b) of the Code) as such
Person or is under common control (within the meaning of Section 414(c) of the
Code) with such Person. Unless the context otherwise requires, references in
this Agreement to an "ERISA Affiliate" shall be deemed to be references to an
ERISA Affiliate of the Company.
"EURODOLLAR LOANS" shall mean Revolving Credit Loans the interest rates
on which are at the time determined on the basis of the Fixed Base Rate.
"EVENT OF DEFAULT" shall have the meaning assigned to that term in
Section 10 hereof.
"EXISTING ALCOA STOCK PURCHASE AGREEMENT" shall mean the Stock Purchase
Agreement dated as of September 27, 1982 between Aluminum Corporation of America
and Wesray Products, Inc. (a predecessor of the Company as successor to
Proctor-Silex), together with all schedules, exhibits, annexes and supplements
thereto, as at any time amended or otherwise modified.
"EXISTING ALTOONA PURCHASE AND SALE AGREEMENT" shall mean the Contract
for the Purchase and Sale of Real Estate executed as of the 26th day of June,
1990 between the Company (as successor to Proctor-Silex) and Northern Chatham
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Bedding Company, Inc., together with all schedules, exhibits, annexes and
supplements thereto, as at any time amended or otherwise modified.
"EXISTING HAMILTON BEACH ACQUISITION DOCUMENTS" shall mean the Stock
Purchase Agreement dated October 7, 1986 between the Company (as successor to HB
Holdings Corporation) and Scovill, Inc., together with all schedules, exhibits,
annexes and supplements thereto, as at any time amended or otherwise modified.
"EXISTING PROCTOR-SILEX ACQUISITION DOCUMENTS" shall mean the Agreement
of Merger among NACCO, Housewares and the Company (as successor to
Proctor-Silex), together with all schedules, exhibits, annexes and supplements
thereto, as at any time amended or otherwise modified.
"EXISTING WEAREVER PURCHASE AND SALE AGREEMENT" shall mean the Agreement
of Purchase and Sale dated as of January 30, 1989 by and between the Company (as
successor to Proctor-Silex) and Anchor Hocking Corporation, together with all
schedules, exhibits, annexes and supplements thereto, as at any time amended or
otherwise modified.
"FAS 109" shall mean Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes, issued February 1992.
"FEDERAL BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978,
as amended, as the same may be further amended, and any other applicable law
with respect to bankruptcy, insolvency or reorganization that is successor
thereto.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New
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York on the Business Day next succeeding such day, provided that (i) if the day
for which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to Chase on such day on such
transactions as determined by the U.S. Agent.
"FEE MORTGAGE" shall mean an Indenture of Mortgage, Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing in substantially the
form of Exhibit B-5 hereto (or otherwise satisfactory to the U.S. Agent),
entered into by the Company covering, among other things, real property of the
Company located in Collierville, Tennessee, as amended by Amendment No. 1
thereto in substantially the form of Exhibit B-6 hereto, as at any time further
amended, extended or otherwise modified or replaced.
"FIXED BASE RATE" shall mean, with respect to an Interest Period for a
Eurodollar Loan or a LIBOR Market Loan, the arithmetic mean, as determined by
the U.S. Agent, of the rates per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) quoted by each of the Reference Banks and notified to the
U.S. Agent at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two Business Days prior to the first day of such
Interest Period for the offering by such Reference Bank to leading banks in the
London interbank market of U.S. Dollars for deposit for a term comparable to
such Interest Period and in an amount, in the case of Eurodollar Loans,
comparable to the aggregate principal amount of the Eurodollar Loans to be held
by such Reference Bank for such Interest Period and, in the case of LIBOR Market
Loans, equal to $5,000,000. If any Reference Bank does not timely furnish such
information for determination of any Fixed Base Rate, the U.S. Agent shall
determine such Fixed Base Rate on the basis of information timely furnished by
the remaining Reference Banks.
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"FIXED CHARGES" shall mean, for any period, the sum (computed without
duplication) of (i) Net Capital Expenditures made by the Company and its
Subsidiaries during such period plus (ii) Debt Service for such period plus
(iii) the provision for Federal, state and foreign income taxes ("SUBJECT INCOME
TAXES") provided for on the financial statements of the Company and its
Subsidiaries for such period MINUS (iv) provision for Subject Income Taxes
(benefit) provided for on the financial statements of the Company and its
Subsidiaries for such period.
"FIXED RATE" shall mean, for any Eurodollar Loan, for any Interest
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the U.S. Agent to be equal to the Fixed Base Rate for
such Loan for such Interest Period DIVIDED BY (1 MINUS the Reserve Requirement)
for such Loan for such Interest Period.
"FIXED RATE LOANS" shall mean Eurodollar Loans and Canadian Discount
Rate Loans, and for the purposes of the definition of "Fixed Base Rate" in this
Section 1.01 and in Section 5 hereof, LIBOR Market Loans.
"FOREIGN CURRENCY HEDGING AGREEMENTS" shall mean, with respect to any
Foreign Currency Hedging Arrangement, collectively, the agreement governing such
Foreign Currency Hedging Arrangement, any amendments thereto, any documents
delivered thereunder and any other instruments, guarantees and other documents
(whether general in application or applicable solely to such Foreign Currency
Hedging Arrangement) governing or providing for the rights and obligations of
the parties concerned or at risk.
"FOREIGN CURRENCY HEDGING ARRANGEMENTS" shall mean a forward currency
purchase agreement or other similar arrangement for the transfer or mitigation
of currency fluctuation risk.
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"FUNDED DEBT" shall mean all Indebtedness of the Company or any of its
Subsidiaries (other than Indebtedness owing to the Company or any of its
Subsidiaries) that (a) matures more than one year from the date of its creation
or matures within one year of the date of its creation but is renewable or
extendable, at the option of the Company or any of its Subsidiaries, to a date
more than one year from the date of its creation or (b) arises under a revolving
credit or similar agreement that obligates (or, that upon the exercise of an
option by the Company or any of its Subsidiaries, would obligate) the lender or
lenders thereunder to extend credit during a period of more than one year from
the date of its creation.
"GAAP" shall mean, except where otherwise expressly noted, generally
accepted accounting principles in the United States.
"GENERAL ASSIGNMENT FOR QUEBEC" shall mean the General Assignment of
Book Debts for the Province of Quebec dated October 11, 1990 as amended by the
Renewal Agreement.
"GLEN DIMPLEX" shall mean Glen Dimplex, an unlimited corporation
organized under the laws of the Republic of Ireland.
"GLEN DIMPLEX SUPPLEMENTAL AGREEMENT" shall mean an Agreement in
substantially the form of Exhibit D-3 hereto entered into by Glen Dimplex, as at
any time amended or otherwise modified.
"GLEN ELECTRIC" shall mean Glen Electric, Ltd., a corporation organized
under the laws of Northern Ireland.
"GLEN ELECTRIC SUPPLEMENTAL AGREEMENT" shall mean an Agreement in
substantially the form of Exhibit D-4 hereto entered into by Glen Electric, as
at any time amended or otherwise modified.
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"GOVERNMENT CONTRACT" shall mean a contract between the Company or a
Subsidiary and a government, or an agency or instrumentality or political
subdivision thereof, providing for the sale of Inventory or performance of
services in the ordinary course of business of the Company or such Subsidiary.
"GOVERNMENT CONTRACT ASSIGNMENT" shall mean an Assignment of Government
Contracts in substantially the form of Exhibit B-4 hereto entered into by the
Company, as at any time amended or otherwise modified.
"GUARANTEE" by any Person shall mean any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
of the type described in clauses (i) through (iv) (inclusive) of the definition
of "Indebtedness" in this Section 1.01 of any other Person or in any manner
providing for the payment of any such Indebtedness of any other Person or
otherwise protecting the holder of such Indebtedness against loss (whether by
agreement to keep-well, to purchase assets, goods, securities, Indebtedness or
services, or to take-or-pay or otherwise), provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb shall have a correlative
meaning.
"GUARANTEED OBLIGATIONS" shall mean (i) with respect to the Company in
its capacity as a Guarantor, the principal of, and interest on, each Canadian
Dollar Loan and all other amounts (including, without limitation, amounts
payable under Sections 5.06 and 12.03 hereof but excluding amounts payable under
Section 6 hereof) whatsoever payable by PSC, PSM or any other Guarantor (other
than the Company) under this Agreement, any Security Document or the Series B
R/C Notes; (ii) with respect to PSC, the principal of, and interest on, each
U.S. Dollar Loan and each Letter of Credit Obligation and all other amounts
(including, without limitation, amounts payable under Section 5.06 and 12.03
hereof but excluding amounts payable under Section 6 hereof)
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whatsoever payable by the Company or any other Guarantor that is a corporate
Subsidiary of PSC under this Agreement, any Security Document, any Letter of
Credit Document, any Bank Financial Accommodation Document or the Series A R/C
Notes or the Letter of Credit Note; (iii) with respect to PSM, the principal
of, and interest on, each Loan and each Letter of Credit Obligation and all
amounts (including, without limitation, amounts payable under Sections 5.06 and
12.03 hereof) whatsoever payable by the Company or any Guarantor (other than
PSM) under this Agreement, any Security Document, any Letter of Credit
Document, any Bank Financial Accommodation Document or any Note; and (iv) with
respect to any Guarantor (other than the Company, PSC or PSM), the principal
of, and interest on, each Loan and each Letter of Credit Obligation and all
other amounts (including, without limitation, amounts payable under Sections
5.06 and 12.03 hereof) whatsoever payable by the Company or any Guarantor
(other than such Guarantor) under this Agreement, any Security Document, any
Letter of Credit Document, any Bank Financial Accommodation Document or any
Note.
"GUARANTORS" shall mean (i) the Company; (ii) PSC (upon the occurrence
of a Contingent Event); (iii) PSM (upon the occurrence of a Contingent Event);
and (iv) any Material Subsidiary that becomes a "Guarantor" by operation of
Section 9.27(b) hereof.
"HAMILTON BEACH" shall mean Hamilton Beach Inc., a Delaware corporation
and the predecessor of the Company.
"HAZARDOUS MATERIALS" shall have the meaning assigned to that term in
Section 8.16 hereof.
"HOLDINGS" shall mean HB-PS Holding Company, Inc., a Delaware
corporation and the holder of 100% of the common stock of the Company.
"HOLDINGS DIVIDEND" shall mean the dividend in cash made by the Company
to Holdings no later than 90 days after
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the Amendment Effective Date in an amount up to but not exceeding $15,000,000.
"HOLDINGS DOCUMENTS" shall mean the Holdings Pledge Agreement and the
Holdings Supplemental Agreement.
"HOLDINGS PLEDGE AGREEMENT" shall mean the Pledge Agreement in
substantially the form of Exhibit D-10 hereto entered into by Holdings, as at
any time amended or otherwise modified.
"HOLDINGS SUPPLEMENTAL AGREEMENT" shall mean an Agreement in
substantially the form of Exhibit D-6 hereto entered into by Holdings, as at any
time amended or otherwise modified.
"HOUSEWARES" shall mean Housewares Holding Company, a Delaware
corporation and a Wholly-Owned Subsidiary of NACCO.
"HOUSEWARES PLEDGE AGREEMENT" shall mean the Pledge Agreement in
substantially the form of Exhibit D-8 hereto entered into by Housewares, as at
any time amended or otherwise modified.
"HOUSEWARES SUPPLEMENTAL AGREEMENT" shall mean an Agreement in
substantially the form of Exhibit D-2 hereto entered into by Housewares, as at
any time amended or otherwise modified.
"INDEBTEDNESS" shall mean, as to any Person: (i) all obligations of such
Person for borrowed money (including, without limitation, Intercompany Advances
and Parent Advances to such Person) or evidenced by bonds, debentures, notes or
similar instruments; (ii) all obligations of such Person for the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business which are not overdue for more than 90 days;
(iii) all Capital Lease Obligations of such Person; (iv) all obligations of such
Person, contingent or otherwise, in respect of any letters of credit, bankers'
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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acceptances or surety bonds, bid bonds or performance bonds; and (v) all
Indebtedness of the type described in clauses (i) through (iv) (inclusive)
above of others secured by a Lien on any asset of such Person or Guaranteed by
such Person. As used herein, the term "Indebtedness" shall exclude obligations
of the Company with respect to the Interest Rate Protection Arrangements and
Foreign Currency Hedging Arrangements.
"INDEMNITY AGREEMENT" shall mean the Indemnity Agreement dated as of
October 11, 1990 by and among Hamilton Beach, Glen Dimplex, Precis and Glen
Electric, as at any time amended or otherwise modified.
"INDIVIDUAL OUTSTANDING OBLIGATIONS" shall mean, with respect to any
U.S. Dollar Bank, the sum of (1) the outstanding principal amount of the Series
A R/C Loans owing to such Bank at such time PLUS (2) the outstanding principal
amount of the Series B R/C Loans owing to the Affiliate of such Bank that is a
Canadian Dollar Bank PLUS (3) such Bank's Outstanding Letter of Credit
Liabilities.
"INITIAL CLEAN-DOWN PERIOD" shall have the meaning assigned to such term
in the definition of the term Clean-Down Period.
"INTERCOMPANY ADVANCES" shall mean (i) advances made to a Subsidiary by
the Company and (ii) advances to the Company by a Subsidiary.
"INTERCOMPANY RECEIVABLES" shall mean (i) Receivables payable by the
Company to a Subsidiary or (ii) Receivables payable by a Subsidiary to the
Company.
"INTEREST COVERAGE RATIO" shall mean, at any time, for the Company and
its Subsidiaries, the ratio of (i) Adjusted Cash Flow for the current
Computation Period to (ii) Interest Expense for the current Computation Period.
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"INTEREST EXPENSE" shall mean, for any period, for any Person and its
Subsidiaries (if any) determined on a consolidated basis in accordance with
GAAP, the sum of (i) all interest accrued during such period on Indebtedness of
such Person and its Subsidiaries (whether or not paid during such period) PLUS
(ii) the net amounts payable by the Company and the Subsidiaries (or MINUS the
net amounts receivable by the Company and the Subsidiaries) under Interest Rate
Protection Agreements (whether or not actually paid or received during such
period); provided that "Interest Expense" shall exclude to the extent included
accrued facility fees payable under Section 2.04(a) hereof and accrued letter of
credit fees payable under Section 2.01(II)(a)(4) hereof, in each case for the
period of determination.
"INTEREST PERIOD" shall mean:
(a) With respect to any Eurodollar Loan, each period commencing on the
date such Loan is made or is Converted from a Loan of another type or the last
day of the next preceding Interest Period for such Loan, and ending on the
numerically corresponding day in the first, second, third or sixth month
thereafter, as the Company may select as provided in Section 4.05 hereof, except
that each Interest Period which commences on the last Business Day of a calendar
month (or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.
(b) With respect to any Canadian Discount Rate Loan, each period
commencing on the date such Loan is made or is Converted from a Loan of another
type or the last day of the next preceding Interest Period for such Loan, and
ending on the Business Day 30, 60, 90 or 180 days thereafter, as the Company may
select as provided in Section 4.05 hereof.
(c) With respect to any Set Rate Loan, the period commencing on the
date such Set Rate Loan is made and ending
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on any Business Day up to 180 days thereafter, as the Company may select as
provided in Section 2.01(III)(b) hereof; and
(d) With respect to any LIBOR Market Loan, the period commencing on the
date such LIBOR Market Loan is made and ending on the numerically corresponding
day in the first, second, third or sixth calendar month thereafter, as the
Company may select as provided in Section 2.01(III)(b) hereof, except that each
Interest Period that commences on the last Business Day of a calendar month (or
any day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period would otherwise
commence before and end after the Revolving Credit Termination Date, such
Interest Period shall not be available hereunder; (ii) each Interest Period that
would otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day; (provided that, in the case of an Interest Period for a
Eurodollar Loan or a LIBOR Market Loan, if such next succeeding Business Day
falls in the next succeeding calendar month, such Interest Period shall end on
the next preceding Business Day); and (iii) the Company shall select the
duration of Interest Periods in such a way so that, notwithstanding clauses (i)
and (ii) above, no Interest Period in respect of Eurodollar Loans shall have a
duration of less than one month and no Interest Period in respect of Canadian
Discount Rate Loans shall have a duration of less than 30 days (and, if any
Eurodollar Loans or Canadian Discount Rate Loans would otherwise have an
Interest Period of a shorter duration, they shall be Base Rate Loans or Canadian
Floating Rate Loans, as the case may be, for the relevant period).
"INTEREST RATE PROTECTION AGREEMENTS" shall mean, with respect to any
Interest Rate Protection Arrangement, collectively, the agreement governing such
Interest Rate Protection Arrangement, any amendments thereto, any
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documents delivered thereunder and any other instruments, guarantees and other
documents (whether general in application or applicable solely to such Interest
Rate Protection Arrangement) governing or providing for the rights and
obligations of the parties concerned or at risk.
"INTEREST RATE PROTECTION ARRANGEMENTS" shall mean an interest rate
swap, cap or collar agreement or similar arrangement providing for the transfer
or mitigation of interest risks either generally or under specific
contingencies.
"INVENTORY" shall mean, with respect to any Person, all inventory (as
defined in the Uniform Commercial Code of the State of New York) of such Person,
wherever located, now or hereafter existing (including, but not limited to, (i)
any specific items or types of inventory set forth on Schedule V hereto; (ii)
raw materials and finished goods (but not work in process); (iii) goods in which
such Person has an interest in mass or a joint or other interest or right of any
kind; and (iv) goods which are returned to or repossessed by such Person) and
all accessions thereto and products thereof.
"INVESTMENT" by the Company or any of the Subsidiaries shall mean:
(i) the amount paid or committed to be paid, or the
value of property or services contributed or committed to be
contributed, by the Company or such Subsidiary for or in connection
with any stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of any Person; and
(ii) the amount of any advance, loan or extension of
credit to any Person by the Company or such Subsidiary (including,
without limitation, Intercompany Advances and Intercompany Receivables)
but excluding (a) any such advance, loan or extension of credit having
a term not exceeding one year made by the
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Company or such Subsidiary to trade customers of the Company or
such Subsidiary (excluding Affiliates of the Company or such Subsidiary
in respect of transactions permitted by Section 9.15 hereof) in the
ordinary course of the Company's or such Subsidiary's business and (b)
advances to employees of the Company or such Subsidiary in the ordinary
course of business for the purpose of defraying travel, relocation and
business expenses and (without duplication) any such amount committed
to be advanced, loaned or extended to any such employee by the Company
or such Subsidiary.
"ISSUANCE" shall mean (a) any issuance or sale by the Company or any of
its Subsidiaries after the Amendment Effective Date of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other than
any warrants or options issued to directors, officers or employees of the
Company or any of its Subsidiaries pursuant to employee benefit plans
established in the ordinary course of business and any capital stock of the
Company issued upon the exercise of such warrants or options), (iii) any other
security or instrument representing an equity interest (or the right to obtain
any equity interest) in the Company or any of its Subsidiaries, (iv) any Funded
Debt or (b) the receipt by the Company or any of its Subsidiaries after the
Amendment Effective Date of any capital contribution (whether or not evidenced
by any equity security issued by the recipient of such contribution); PROVIDED
that Issuance shall not include (x) any such issuance or sale by any Subsidiary
of the Company to the Company or any Wholly Owned Subsidiary of the Company, (y)
any capital contribution by the Company or any Wholly Owned Subsidiary of the
Company to any Subsidiary of the Company or (z) any Parent Advances.
"ISSUING BANK" shall mean Chase or a Bank serving as Chase's successor
in Chase's capacity as issuer of Letters of Credit under Section 2.01(II)
hereof.
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"LEASEHOLD MORTGAGES" shall mean, an Indenture of Leasehold Mortgage,
Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing for
each of the below listed properties, each in substantially the form of Exhibit
B-5 hereto (or otherwise satisfactory to the U.S. Agent), entered into by the
Company covering, among other things, leasehold interests of the Company in
property located in Glen Allen, Virginia and Washington, North Carolina, each as
amended by Amendment No. 1 thereto in substantially the form of Exhibit B-6
hereto, as at any time further amended, extended or otherwise modified or
replaced.
"LETTERS OF CREDIT" shall mean Commercial Letters of Credit, Bond
Letters of Credit and Letters of Indemnity.
"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any Letter of
Credit, collectively, such Letter of Credit, any amendments thereto, any
documents delivered thereunder, any application therefor and any other
agreements, instruments, guarantees or other documents (whether general in
application or applicable solely to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned or at risk
or (ii) any collateral security for such obligations.
"LETTER OF CREDIT LIABILITIES" shall mean, at any time, the sum
(determined without duplication) of (i) the aggregate outstanding and undrawn
maximum face amount of all Letters of Credit PLUS (ii) Reimbursement
Obligations.
"LETTER OF CREDIT NOTE" shall have the meaning assigned to that term in
Section 2.07(c) hereof.
"LETTER OF CREDIT OBLIGATIONS" shall have the meaning assigned to that
term in Section 2.01(II)(d) hereof.
"LETTER OF CREDIT PERCENTAGE" shall mean, with respect to any U.S.
Dollar Bank for any Letter of Credit, the quotient (expressed as a percentage)
equal to (A) the unused amount of such Bank's Revolving Credit Commitment at the
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time of the issuance of such Letter of Credit DIVIDED BY (B) the aggregate
amount of the unused Revolving Credit Commitments of all U.S. Dollar Banks at
the time of the issuance of such Letter of Credit.
"LETTER OF CREDIT SUBLIMIT" shall mean U.S.$15,000,000.
"LETTER OF INDEMNITY" shall mean any letter of indemnity in the form
customarily used by the Issuing Bank at the time for transactions of the type
involved issued by the Issuing Bank for the account of the Company in connection
with a transaction under which a Commercial Letter of Credit has been issued.
"LEVEL" shall mean any of Level I Period, Level II Period, Level III
Period, Level IV Period, Level V Period or Level VI Period, as the case may be.
"LEVEL I PERIOD" shall mean any period during which the Interest
Coverage Ratio is greater than or equal to 4.50 to 1.
"LEVEL II PERIOD" shall mean any period during which the Interest
Coverage Ratio is less than 4.50 to 1 but greater than or equal to 3.50 to 1.
"LEVEL III PERIOD" shall mean any period during which the Interest
Coverage Ratio is less than 3.50 to 1 but greater than or equal to 3.0 to 1.
"LEVEL IV PERIOD" shall mean any period during which the Interest
Coverage Ratio is less than 3.0 to 1 but greater than or equal to 2.75 to 1.
"LEVEL V PERIOD" shall mean any period during which the Interest
Coverage Ratio is less than 2.75 to 1 but greater than or equal to 2.50 to 1.
"LEVEL VI PERIOD" shall mean any period during which the Interest
Coverage Ratio is less than 2.50 to 1.
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"LEVERAGE RATIO" shall mean, on any day, the ratio of (a) Total Debt of
the Company and the Subsidiaries as of such day determined on a consolidated
basis in accordance with GAAP TO (b) the sum of (i) Net Worth of the Company
PLUS (ii) Total Debt.
"LIBO MARGIN" shall have the meaning assigned to such term in Section
2.01(III)(c)(ii)(C) hereof.
"LIBO RATE" shall mean, for any LIBOR Market Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the
U.S. Agent to be equal to the rate of interest specified in the definition of
"Fixed Base Rate" in this Section 1.01 for the Interest Period for such Loan
divided by 1 minus the Reserve Requirement (if any) for such Loan for such
Interest Period.
"LIBOR AUCTION" shall mean a solicitation of Money Market Quotes setting
forth LIBO Margins based on the LIBO Rate pursuant to Section 2.01(III) hereof.
"LIBOR MARKET LOANS" shall mean Money Market Loans interest rates on
which are determined on the basis of LIBO Rates pursuant to a LIBOR Auction.
"LIEN" shall mean, with respect to any asset, any mortgage, hypothec,
deed of trust, lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset (including any agreement to give any of the
foregoing), any conditional sale or other title retention agreement, any lease
or charter in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code (or filing of like
intendment under applicable law) of any jurisdiction.
"LOANS" shall mean Revolving Credit Loans and Money Market Loans.
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"LONDON BRANCH" shall mean the principal London Branch of Chase.
"MAJORITY BANKS" shall mean, at any time, (i) except as expressly set
forth in clause (ii) below, U.S. Dollar Banks having at least 51% of the
Revolving Credit Commitments (whether or not utilized) and (ii) for purposes of
the last paragraph of Section 10 hereof and at all times after any action
specified in said last paragraph of Section 10 has been taken or has occurred,
if at the time of application of said paragraph Loans are outstanding, U.S.
Dollar Banks holding at least 51% of the aggregate outstanding principal amount
of the Loans (solely for which purpose, Loans held by a Canadian Dollar Bank
shall be deemed to be held by the U.S. Dollar Bank of which such Canadian Dollar
Bank is an Affiliate).
"MAJORITY INTEREST DEBT" shall mean NACCO Debt (as defined in the NACCO
Supplemental Agreement), Housewares Debt (as defined in the Housewares
Supplemental Agreement) and Subsidiary Debt (as defined in any Affiliate
Supplemental Agreement to which an Affiliate of NACCO is a party).
"MAJORITY INTEREST DOCUMENTS" shall mean each Supplemental Agreement to
which a Majority Interest Party is a party and each Supplemental Security
Document to which a Majority Interest Party is a party.
"MAJORITY INTEREST PARTY" shall mean NACCO, Housewares, each Affiliate
of NACCO party to an Affiliate Supplemental Agreement and each holder from time
to time of Majority Interest Debt.
"MANAGEMENT FEE" shall mean a fee to any Affiliate of the Company with
respect to administrative and other managerial services performed by such Person
for the Company and the Subsidiaries. As used herein, the term "Management Fee"
shall exclude reimbursement of out-of-pocket costs and
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expenses incurred by an Affiliate of the Company on behalf of the Company and
the Subsidiaries.
"MANAGEMENT FINANCIAL FORECASTS" shall mean the financial forecasts
prepared by the Company and furnished to the Banks prior to the Amendment
Effective Date.
"MATERIAL SUBSIDIARY" shall mean, with respect to the Company, PSC, PSM
and each other Subsidiary of the Company (i) having at any time Net Worth in
excess of U.S.$1,000,000 (or a U.S. Dollar Equivalent) or (ii) acquired in
accordance with Section 9.13(b) hereof for consideration in excess of
U.S.$l,000,000 (or a U.S. Dollar Equivalent).
"MEXICO" shall mean the United Mexican States.
"MINORITY INTEREST DEBT" shall mean (i) Glen Dimplex Debt (as defined in
the Glen Dimplex Supplemental Agreement); (ii) Precis Debt (as defined in the
Precis Supplemental Agreement); (iii) Glen Electric Debt (as defined in the Glen
Electric Supplemental Agreement); (iv) Subsidiary Debt (as defined in any
Affiliate Supplemental Agreement to which an Affiliate of Glen Dimplex is a
party); and (v) with respect to any Minority Interest Party (other than Glen
Dimplex, Precis, Glen Electric or any Affiliate of Glen Dimplex party to an
Affiliate Supplemental Agreement) all Indebtedness (whether principal or
interest) and other obligations from time to time owing by the Company or any of
the Subsidiaries to such Minority Interest Party, whether in respect of Parent
Advances of such Minority Interest Party or otherwise but shall not include
obligations of the Company or any of the Subsidiaries to such Minority Interest
Party or any of its Subsidiaries in respect of reimbursement of out-of-pocket
costs and expenses incurred on behalf of the Company or any of the Subsidiaries
and which do not constitute Indebtedness.
"MINORITY INTEREST DISPOSITION" shall mean a sale or other transfer by a
Minority Interest Party of shares of capital stock of the Company, Holdings or
Precis
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contemplated by, and consummated in accordance with the terms and conditions
of, Section 2.01 of the Override Agreement.
"MINORITY INTEREST DOCUMENTS" shall mean each Supplemental Agreement to
which a Minority Interest Party is a party and each Supplemental Security
Document to which a Minority Interest Party is a party.
"MINORITY INTEREST PARTY" shall mean (i) prior to the consummation of a
Minority Interest Disposition, Glen Dimplex, Glen Electric, Precis, each
Affiliate of Glen Dimplex party to an Affiliate Supplemental Agreement and each
holder (other than a Majority Interest Party) from time to time of Minority
Interest Debt and (ii) after giving effect to a Minority Interest Disposition,
such of the Persons described in clause (i) above that continue to be party to a
Minority Interest Document and each Successor Minority Interest Party.
"MONEY MARKET BORROWING" shall have the meaning assigned to such term in
Section 2.01(III)(b) hereof.
"MONEY MARKET LOAN LIMIT" shall have the meaning assigned to such term
in Section 2.01(III)(c)(ii) hereof.
"MONEY MARKET LOANS" shall mean the loans provided for by Section
2.01(III) hereof.
"MONEY MARKET NOTES" shall mean the promissory notes provided for by
Section 2.07(a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"MONEY MARKET QUOTE" shall mean an offer in accordance with Section
2.01(III)(c) hereof by a Bank to make a Money Market Loan with one single
specified interest rate.
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"MONEY MARKET QUOTE REQUEST" shall have the meaning assigned to such
term in Section 2.01(III)(b) hereof.
"MORTGAGE AMENDMENT" shall mean Amendment No. 2 to each of the
Mortgages, dated as of the Amendment Effective Date, in substantially the form
of Exhibit B-6 hereto.
"MORTGAGES" shall mean the Fee Mortgage and the Leasehold Mortgages.
"MULTIEMPLOYER PLAN" shall mean with respect to any Person a Plan
defined as such in Section 3(37) of ERISA to which contributions have been made
by such Person or any ERISA Affiliate of such Person and which is covered by
Title IV of ERISA. Unless the context otherwise requires, references in this
Agreement to a "Multiemployer Plan" shall be deemed to be to a Multiemployer
Plan of the Company.
"NACCO" shall mean NACCO Industries, Inc., a Delaware corporation.
"NACCO SUPPLEMENTAL AGREEMENT" shall mean an Agreement in substantially
the form of Exhibit D-1 hereto entered into by NACCO, as at any time amended or
otherwise modified.
"NET CAPITAL EXPENDITURES" shall mean, for any period, the sum of (i)
Capital Expenditures of the Company and the Subsidiaries during such period
MINUS (ii) expenditures from Disposition Proceeds and Casualty Insurance
Proceeds by the Company and the Subsidiaries during such period to the extent
included in Capital Expenditures.
"NET CASUALTY INSURANCE PROCEEDS" shall mean, as of the last day of any
Computation Period, the portion of Casualty Insurance Proceeds received during
the first fiscal quarter of the Company occurring during such Computation Period
and not Applied in such Computation Period.
"NET DISPOSITION PROCEEDS" shall mean, as of the last day of any
Computation Period, the portion of Disposition
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Proceeds received during the first fiscal quarter of the Company occurring
during such Computation Period and not Applied in such Computation Period.
"NET WORTH" shall mean, on any date of determination, the sum of the
following for any Person and its Subsidiaries (if any) determined on a
consolidated basis in accordance with GAAP at the last day of the fiscal quarter
ending on, or nearest to, such date of determination: (i) the amount of share
capital (less cost of treasury shares) PLUS (ii) the amount of surplus and
retained earnings (or, in the case of a surplus or retained earnings deficit
MINUS the amount of such deficit) MINUS (iii) any increase (without giving
effect to any amortization) from and after the Amendment Effective Date in the
sum of the following (without duplication of deductions in respect of items
already deducted in arriving at surplus and retained earnings): the book value
of all assets which would be treated as intangibles under GAAP, including,
without limitation, good-will, trademarks, trade-names, copyrights, patents and
unamortized debt discount and expense; minority interests in Subsidiaries; share
capital discount and expense; any excess of cost over market value of
investments; and any write-up in book value of assets resulting from a
revaluation thereof subsequent to the Amendment Effective Date.
"NON-CONSENSUAL LIENS" shall have the meaning assigned to that term in
Section 10(e) hereof.
"NOTES" shall mean the Revolving Credit Notes and the Money Market
Notes.
"OBLIGORS" shall mean the Borrowers, PSM and each other Material
Subsidiary that becomes a Guarantor by operation of Section 9.27(b) hereof.
"OFFICER'S CERTIFICATE" shall mean, with respect to any Person, a
certificate executed and delivered on behalf of such Person by a Responsible
Officer of such Person.
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"OUTSTANDING LETTER OF CREDIT LIABILITIES" shall mean, with respect to
any U.S. Dollar Bank, the sum of (1) the participation of such Bank in Letter of
Credit Liabilities outstanding (and that will arise with respect to Letters of
Credit in respect of which a notice of issuance has been delivered to the U.S.
Agent in accordance with Section 4.05 hereof) at such time (other than such
Bank's participation in Reimbursement Obligations in respect of which a notice
of borrowing for a borrowing of Revolving Credit Loans at such time to refinance
such Reimbursement Obligations has been delivered to the U.S. Agent in
accordance with Section 4.05 hereof) PLUS (2) the Revolving Credit Commitment
Percentage of such Bank of Bank Letter of Credit Liabilities outstanding (or
that will arise in connection with Bank Letters of Credit for which there has
been a request by the Company for issuance) at such time (other than Bank Letter
of Credit Reimbursement Obligations in respect of which a notice of borrowing
for a borrowing of Revolving Credit Loans at such time to refinance such Bank
Letter of Credit Reimbursement Obligations has been delivered to the U.S. Agent
in accordance with Section 4.05 hereof) as then in effect.
"OVERRIDE AGREEMENT" shall mean an agreement in substantially the form
of Exhibit D-12 hereto entered into by NACCO, Housewares, Glen Dimplex, Glen
Electric and Precis, as at any time amended or otherwise modified.
"PARENT ADVANCES" shall mean those advances by a Majority Interest Party
or a Minority Interest Party to the Company in accordance with, and subject to
the terms of, the relevant Supplemental Agreement, evidenced by a promissory
note in substantially the form of Exhibit A to the relevant Supplemental
Agreement, duly executed and completed.
"PATENTS ASSIGNMENT" shall mean a Collateral Assignment of Patents and
Trademarks and Security Agreement in substantially the form of Exhibit B-3
hereto entered into by the Company, as at any time amended or otherwise
modified.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERIL" shall mean, collectively or individually, fire, lightning,
flood, windstorm, hail, explosion, riot and civil commotion, vandalism and
malicious mischief, damage from aircraft, vehicles and smoke and all other
perils covered by the "all-risk" endorsement then in use in the state, province
or country in which the facilities owned, leased or used by the Company and the
Subsidiaries are located.
"PERMITTED PARENT LIENS" shall mean (i) with respect to Holdings'
capital stock, Liens under the Supplemental Security Documents or Liens under
Article 8 of the Reorganization Agreement or Liens under Articles 2 and 5 of the
Shareholders Agreement to the extent that the same constitute "encumbrances" as
that term is used in the definition of "Lien" in this Section 1.01; and (ii)
with respect to the Company's capital stock, Liens under the Supplemental
Security Documents or Liens under Articles 2 and 5 of the Shareholders Agreement
to the extent that the same constitute "encumbrances" as that term is used in
the definition of "Lien" in this Section 1.01.
"PERSON" shall mean any individual, corporation, partnership, trust,
joint venture, unincorporated association or other enterprise or any government
or any agency, instrumentality or political subdivision thereof.
"PLAN" shall mean, with respect to any Person, an employee benefit or
other plan established or maintained by such Person or any ERISA Affiliate of
such Person and which is covered by Title IV of ERISA, other than a
Multiemployer Plan. Unless the context otherwise requires, references in this
Agreement to a "Plan" shall be deemed to be references to a Plan of the Company.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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"PLEDGE AGREEMENTS" shall mean (i) a Pledge Agreement in substantially
the form of Exhibit B-1-A hereto entered into by the Company; (ii) a Pledge
Agreement in substantially the form of Exhibit B-1-B hereto entered into by the
Company; (iii) a Pledge Agreement in substantially the form of Exhibit B-1-C
hereto entered into by the Company; and (iv) a Pledge Agreement in substantially
the form of Exhibit B-1-D hereto entered into by the Company, as any thereof may
at any time be amended or otherwise modified.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan
or any other amount whatsoever payable by any Borrower under this Agreement or
any Note which is not paid when due (whether at stated maturity, by acceleration
or otherwise), a rate per annum during the period commencing on and including
the due date of such amount to but not including the date such amount is paid in
full equal to 2% per annum above the Base Rate (or in the case of Canadian
Dollar Loans, the Canadian Dollar Floating Rate) from time to time PLUS the
Applicable Margin for Base Rate Loans (provided that, if the amount so in
default is principal of a Eurodollar Loan or a Canadian Discount Rate Loan or a
Money Market Loan and the due date therefor is a day other than the last day of
an Interest Period therefor, the "Post-Default Rate" for such principal shall
be, for the period commencing on and including the due date to but not including
the last day of the then current Interest Period therefor, 2% per annum above
the interest rate for such Loan as provided in Section 3.02(a) hereof and,
thereafter, the rate provided for above in this definition).
"PRECIS" shall mean Precis 521 Ltd., a corporation organized under the
laws of England and a Wholly-Owned Subsidiary of Glen Electric.
"PRECIS OVERRIDE AGREEMENT" shall mean the Override Agreement in
substantially the form of Exhibit D-11 hereto entered into by Precis, as at any
time amended or otherwise modified.
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"PRECIS PLEDGE AGREEMENT" shall mean the Pledge Agreement in
substantially the form of Exhibit D-9 hereto entered into by Precis, as at any
time amended or otherwise modified.
"PRECIS SUPPLEMENTAL AGREEMENT" shall mean an Agreement in substantially
the form of Exhibit D-5 hereto entered into by Precis, as at any time amended or
otherwise modified.
"PREFERRED STOCK" shall mean the Class A Preferred Stock of the Company.
"PRIME RATE" shall mean the rate of interest from time to time announced
by Chase at the Principal Office as its prime commercial lending rate.
"PRINCIPAL OFFICE" shall mean the principal office of the Agent and
Chase, presently located at 1 Chase Manhattan Plaza, New York, New York, U.S.A.
10081.
"PROCTOR-SILEX" shall mean Proctor-Silex, Inc., a Delaware corporation
and the predecessor of the Company.
"PROCTOR-SILEX TAX SHARING ADVANCES" shall mean advances by NACCO to the
Company under, and pursuant to, the Proctor-Silex Tax Sharing Agreement and
relating to the period prior to the Closing Date.
"PROCTOR-SILEX TAX SHARING AGREEMENT" shall mean the Tax Sharing
Agreement dated as of December 31, 1985, as amended by the First Amendment to
Tax Sharing Agreement dated as of September 12, 1986, among NACCO and certain
Subsidiaries of NACCO (including Housewares and Proctor-Silex), as at any time
otherwise amended or otherwise modified.
"PRODUCT RECALL EVENT" shall mean, with respect to any Person (i)
written notice to such Person or any of its Subsidiaries from CPSC to the effect
that a product produced
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and sold by any Person or any of its Subsidiaries (a "PRODUCT") presents a
substantial product hazard and, therefore, should be voluntarily recalled; (ii)
any voluntary recall of a Product (whether or not in response to a notice of
the type described in clause (i) above); or (iii) any recall of a Product
mandated by the CPSC.
"PRODUCT RECALL LIABILITY" shall mean, with respect to any Product
Recall Event, the estimated potential real and contingent liability imposed on
or incurred by such Person or any of its Subsidiaries with respect to such
Product Recall (assuming, if applicable, in connection with such estimation that
the Product Recall Event referred to in clause (i) of the definition of "Product
Recall Event" in this Section 1.01 resulted in a recall of all Products
specified in the notice referred to in such clause).
"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"QUARTERLY DATE" shall mean the last Business Day of each June,
September, December and March.
"RECEIVABLES" shall mean, as to the Company or any of the Subsidiaries,
all accounts (as defined in the Uniform Commercial Code) (including, without
limitation accounts receivable) whether billed or unbilled, arising out of the
sale of Inventory or performance of services in the ordinary course of business.
"RECONCILIATION STATEMENT" shall have the meaning assigned thereto in
the last paragraph of Section 9.01 hereof.
"PREFERENCE BANKS" shall mean Chase, The Bank of Nova Scotia and The
First National Bank of Chicago (or their Applicable Lending Offices, as the case
may be).
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"REFINANCED INDEBTEDNESS" shall mean the Indebtedness of the Company and
the Subsidiaries to be prepaid in full on the Amendment Effective Date with the
proceeds of Loans and listed beneath the heading "Refinanced Indebtedness" on
Schedule III hereto.
"REGULATION D", "REGULATION G", "REGULATION T", "REGULATION U" AND
"REGULATION X" shall mean Regulation D, Regulation G, Regulation T, Regulation U
and Regulation X of the Board of Governors of the Federal Reserve System (or any
successor to all or a portion thereof establishing reserve requirements or
relating to margin stock, as the case may be), as the same may be amended,
modified or supplemented and in effect from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Bank, any change
after the date of this Agreement in United States Federal, state or foreign law
or regulations (including Regulation D) or the adoption or making after such
date of any interpretation, directive or request applying to a class of banks
including such Bank of or under any United States Federal, state or foreign law
or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time, collectively, the
obligations of the Company then outstanding under Section 2.01(II) hereof in
respect of Letters of Credit to reimburse the Issuing Bank for the amount paid
by the Issuing Bank in respect of any drawing under a Letter of Credit.
"RELEASE" shall have the meaning assigned to that term in Section 8.16
hereof. The term "Release" used as a verb shall have a correlative meaning.
"RENEWAL AGREEMENT" shall mean the Renewal Agreement dated as of the
Amendment Effective Date by PSC in favor of
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the Canadian Agent, in substantially the form of Exhibit C-3 hereto.
"REORGANIZATION AGREEMENT" shall mean the Reorganization and Merger
Agreement dated as of October 11, 1990 by and among Housewares, Holdings,
Proctor-Silex, Precis, Glen Electric and Hamilton Beach, together with all
schedules, exhibits, annexes and supplements thereto, as at any time amended or
otherwise modified.
"REORGANIZATION DOCUMENTS" shall mean the Reorganization Agreement, the
Shareholders Agreement and the Indemnity Agreement.
"RESERVE REQUIREMENT" shall mean, for any Eurodollar Loan or LIBOR
Market Loan for any Interest Period therefor, the average maximum rate at which
reserves (including any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion U.S. Dollars against "Eurodollar liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks by reason of any Regulatory Change against (i)
any category of liabilities which includes deposits by reference to which the
Fixed Base Rate for Eurodollar Loans or LIBORMarket Loans is to be determined as
provided in the definition of "Fixed Base Rate" in this Section 1.01 or (ii) any
category of extensions of credit or other assets which include Eurodollar Loans
or LIBOR Market Loans.
"RESPONSIBLE OFFICER" shall mean, with respect to any Person, its
chairman (in the case of Glen Dimplex, Glen Electric or Precis), its directors,
its president, any vice president who is a corporate officer, its treasurer or
any assistant treasurer, its secretary or any assistant secretary, with respect
to ERISA-related matters, its
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benefits manager and with respect to insurance-related matters, its insurance
manager.
"RESTATEMENT DATE" shall mean April 18, 1995.
"RESTRICTED PAYMENTS" shall mean (a) dividends of the Company (in cash,
property or obligations) on, or other payments or distributions on account of
(whether made by the Company or any of the Subsidiaries), or the setting apart
of money for a sinking or other analogous fund (whether made by the Company or
any of the Subsidiaries) for, or the purchase, redemption, retirement or other
acquisition of, any shares of any class of stock of the Company or any
Subordinated Indebtedness of the Company and (b) payment of Subordinated
Indebtedness or Management Fees by the Company.
"RESTRICTED PAYMENTS PERIOD" shall mean (i) any Clean-Down Period and
the 45 days thereafter and (ii) any other period approved by the Majority Banks.
"REVOLVING CREDIT COMMITMENT" shall mean, as to each U.S. Dollar Bank,
the obligation of such Bank to make Revolving Credit Loans up to an aggregate
principal amount at any one time outstanding equal to the amount set forth for
such Bank on Schedule I hereto opposite the heading "Revolving Credit
Commitment" (as the same may be reduced pursuant to Section 2.03 or 3.03(c)
hereof). The initial aggregate amount of the Revolving Credit Commitments of
the U.S. Dollar Banks is U.S.$135,000,000.
"REVOLVING CREDIT COMMITMENT PERCENTAGE" shall mean, with respect to any
U.S. Dollar Bank, the quotient (expressed as a percentage) equal to (i) the
Revolving Credit Commitment of such Bank DIVIDED BY (ii) the aggregate amount of
Revolving Credit Commitments of all of the U.S. Dollar Banks.
"REVOLVING CREDIT LOANS" shall mean, collectively, Series A R/C Loans
and Series B R/C Loans.
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"REVOLVING CREDIT NOTES" shall mean the promissory notes provided for by
Section 2.07(b) hereof and all promissory notes delivered in substitution or
exchange thereof, in each case as the same shall be modified and supplemented
and in effect from time to time.
"REVOLVING CREDIT TERMINATION DATE" shall mean the third anniversary of
the Amendment Effective Date, as the same may be extended pursuant to Section
2.09 hereof; provided that, if such date is not a Business Day, the Revolving
Credit Termination Date shall be the next preceding Business Day.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"SECURITY AGREEMENT" shall mean a Security Agreement in substantially
the form of Exhibit B-2 hereto entered into by the Company, as at any time
amended or otherwise modified.
"SECURITY DOCUMENTS" shall mean (i) the Pledge Agreements; (ii) the
Security Agreement; (iii) the Patents Assignment; (iv) as and when executed and
delivered by the Company, the Government Contract Assignments; (v) as and when
executed and delivered by the Company, the Mortgages; (vi) the Canadian Security
Documents; (vii) the Confirmation Agreement; and (viii) as and when executed and
delivered by the relevant Obligor, each other mortgage, security agreement or
other document contemplated by Section 9.23(b), 9.23(c) or 9.27 hereof, as any
thereof are at any time amended or otherwise modified, in each case as and when
executed and delivered by the intended parties thereto.
"SERIES" shall mean, with respect to any Loan, a Series A R/C Loan or a
Series B R/C Loan.
"SERIES A R/C COMMITMENTS" shall mean the Revolving Credit Commitments
of the Banks.
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"SERIES A R/C LOANS" shall mean the Loans provided for in Section
2.01(I)(b)(i) hereof.
"SERIES A R/C NOTES" shall have the meaning assigned to such term in
Section 2.07(b) hereof.
"SERIES B R/C LOANS" shall have the meaning assigned to such term in
Section 2.01(I)(b)(ii) hereof.
"SERIES B R/C NOTES" shall have the meaning assigned to such term in
Section 2.07(b) hereof.
"SERIES B SUBLIMIT" shall mean U.S.$10,000,000.
"SERIES B SUBLIMIT AMOUNT" shall mean, as to each U.S. Dollar Bank that
has an Affiliate that is a Canadian Dollar Bank, the amount set forth on
Schedule I hereto opposite the heading "Series B Sublimit" under the name of
such Canadian Dollar Bank.
"SET RATE" shall have the meaning assigned to such term in Section
2.01(III)(c)(ii)(D) hereof.
"SET RATE AUCTION" shall mean a solicitation of Money Market Quotes
setting forth Set Rates pursuant to Section 2.01(III) hereof.
"SET RATE LOANS" shall mean Money Market Loans the interest rates on
which are determined on the basis of Set Rates pursuant to a Set Rate Auction.
"SHAREHOLDERS AGREEMENT" shall mean the Shareholders Agreement dated as
of October 11, 1990 by and among Housewares, Holdings, Hamilton Beach and
Precis, as at any time amended or otherwise modified.
"SUBJECT PREPAYMENT" shall have the meaning assigned to such term in
Section 3.03(c) hereof.
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"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of the Company that
is subordinate in right of payment to the prior payment of the obligations of
the Company in respect of the Loans other than Majority Interest Debt and
Minority Interest Debt.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership, joint venture or joint adventure whether now existing or hereafter
organized or acquired: (i) in the case of a corporation, of which a majority of
the outstanding stock having by the terms thereof ordinary voting power for the
election of directors (irrespective of whether or not at the time stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time owned (directly or
beneficially) by such Person and/or one or more Subsidiaries of such Person or
(ii) in the case of a partnership, joint venture or joint adventure, in which
such Person is at the time the sole general partner or joint venturer or joint
adventurer or of which a majority of the partnership or other ownership
interests are at the time owned by such Person and/or one or more Subsidiaries
of such Person. Unless the context otherwise requires, references in this
Agreement to a "Subsidiary" shall be deemed to be references to a Subsidiary of
the Company.
"SUBSIDIARY DIVIDEND PAYMENTS" shall mean dividends of a Subsidiary of
the Company (in cash, property or obligations) on, or other payments or
distributions on account of, any share of any class of stock of such Subsidiary
owned by the Company.
"SUCCESSOR MINORITY INTEREST PARTY" shall mean the Person or Persons
(other than a Majority Interest Party) who shall acquire capital stock of
Holdings (except as otherwise provided in Section 2.02 of the Override
Agreement), capital stock of Precis (in the event that at such time Precis holds
capital stock of the Company or Holdings) as part of a
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Minority Interest Disposition or the other transactions contemplated by Section
2.01 of the Override Agreement.
"SUPPLEMENTAL AGREEMENTS" shall mean (i) the NACCO Supplemental
Agreement; (ii) the Housewares Supplemental Agreement; (iii) the Holdings
Supplemental Agreement; (iv) the Glen Dimplex Supplemental Agreement; (v) the
Glen Electric Supplemental Agreement; (vi) the Precis Supplemental Agreement;
(vii) the Override Agreement; (viii) the Precis Override Agreement; (ix) as and
when executed and delivered, each Affiliate Supplemental Agreement; and (x) as
and when executed and delivered, each Additional Supplemental Agreement, as each
such Supplemental Agreement has been modified and supplemented by the
Confirmation Agreement.
"SUPPLEMENTAL SECURITY DOCUMENTS" shall mean (i) the Housewares Pledge
Agreement; (ii) the Precis Pledge Agreement; (iii) the Holdings Pledge
Agreement; and (iv) as and when executed and delivered, each Additional
Supplemental Security Document.
"TAXES" shall have the meaning assigned to that term in Section 5.06
hereof.
"TAX SHARING ADVANCES" shall mean advances by NACCO to the Company
under, and pursuant to, the Tax Sharing Agreement referred to in clause (i) of
the definition of "Tax Sharing Agreement" in this Section 1.01.
"TAX SHARING AGREEMENT" shall mean (i) during any period that NACCO is
permitted or required to include the Company as a consolidated Subsidiary of
NACCO for Federal income tax purposes, the Tax Sharing Agreement dated as of
October 11, 1990 among NACCO and certain Subsidiaries of NACCO (including
Housewares and the Company), as at any time amended or otherwise modified and
(ii) during any period that NACCO is not permitted or required to include the
Company as a consolidated Subsidiary of NACCO for Federal income tax purposes,
as and when executed and delivered, a
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Tax Sharing Agreement between Holdings and the Company in substantially the
form appended to the certificate referred to in Section 7.01(c)(viii) of the
Original Credit Agreement, as at any time amended or otherwise modified.
"TOTAL DEBT" shall mean, as to any Person, Indebtedness that, in
accordance with GAAP, is required to be reflected as a liability on a balance
sheet of such Person.
"TYPE" shall mean, with respect to any Loan, a Canadian Dollar Loan or a
U.S. Dollar Loan or with respect to U.S. Dollar Loans, a Eurodollar Loan, a Base
Rate Loan, a Set Rate Loan or a LIBOR Market Loan or with respect to Canadian
Dollar Loans, a Canadian Floating Rate Loan or a Canadian Discount Rate Loan.
"UNITED STATES" and "U.S.A." shall mean the United States of America.
"U.S. DOLLAR BANKS" shall mean those Banks listed on Schedule I hereto
under the heading "U.S. Dollar Banks" and any other Banks that may from time to
time have Revolving Credit Commitments or hold U.S. Dollar Loans.
"U.S. DOLLAR EQUIVALENT" shall mean, on any day, and with respect to any
amount of any other currency, the amount of U.S. Dollars purchasable with such
amount of other currency for delivery on such day at the U.S. Dollar Spot Rate
in effect two Business Days before such day.
"U.S. DOLLAR LOAN" shall mean any Loan other than a Canadian Dollar
Loan.
"U.S. DOLLAR SPOT RATE" shall mean, on any day, the rate of exchange for
the purchase by the London Branch with a currency other than U.S. Dollars of
U.S. Dollars in the commercial bank foreign exchange market in London for
delivery two Business Days after such day, quoted by the London Branch at
approximately 4:00 p.m. London time on such
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day (or the next preceding Business Day, if such day is not a Business Day).
"U.S. DOLLARS" and "U.S.$" shall mean lawful money of the United States.
"WHOLLY-OWNED SUBSIDIARY" shall mean, with respect to any Person, any
Subsidiary of such Person all of the shares of capital stock or other ownership
interests (and all rights and options to purchase such shares or other ownership
interests) of which, other than, in the case of a corporate Subsidiary,
directors' qualifying shares, are owned, beneficially and of record, by such
Person or another Wholly-Owned Subsidiary of such Person.
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1.02 ACCOUNTING TERMS AND DETERMINATION; ETC.
(a) ACCOUNTING TERMS. All accounting terms used herein shall (except
as otherwise expressly provided herein) be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Agents or the Banks hereunder shall be prepared in accordance
with GAAP applied on a basis consistent with those used in the preparation of
the latest financial statements furnished to the Agents and the Banks hereunder
after the date hereof. All calculations made for the purposes of determining
compliance with the terms of Sections 9.07, 9.08 and 9.09 hereof (together with
ancillary definitions), computing the Applicable Margin and determining whether
a Contingent Event has occurred shall (except as otherwise expressly provided
herein) be made by application of GAAP applied on a basis consistent with those
used in the preparation of the annual or quarterly financial statements of the
Company and the Subsidiaries most recently furnished to the Banks pursuant to
Section 9.01(a) or 9.01(b) hereof unless (i) the Company shall have objected to
determining such compliance on such basis at the time of delivery of such
financial statements or (ii) the Majority Banks shall so object in writing
within 30 days after delivery of such financial statements, in either of which
events such calculations shall be made on a basis consistent with those used in
the preparation of the latest financial statements of the Company and the
Subsidiaries as to which such objection shall not have been made (which, if
objection is made in respect of the first annual or quarterly financial
statements of the Company and the Subsidiaries delivered under Section 9.01(a)
or 9.01(b) hereof, shall mean the financial statements of the Company and its
Subsidiaries as at December 31, 1993 referred to in Section 8.02(b)(ii) hereof);
provided that, in any event such calculation shall be made by adjusting such
financial statements to ignore the requirements of FAS 109, as reflected in the
Reconciliation Statement.
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(b) STATEMENTS OF VARIATION. The Company shall deliver to each Bank
and the Agents at the same time as the delivery of any annual or quarterly
financial statement under Section 9.01 hereof a description in reasonable detail
of any material variation between the application of accounting principles
employed in the preparation of such statement and the application of accounting
principles employed in the preparation of the next preceding annual or quarterly
financial statements and reasonable estimates of the difference between such
statements arising as a consequence thereof.
(c) FISCAL PERIODS. The Company and the Subsidiaries shall maintain
their accounts on the basis of a fiscal year ending December 31 of each year
(with fiscal quarters ending March 31, June 30, September 30 and December 31).
1.03 CERTAIN COMPUTATIONS. Unless otherwise expressly provided herein,
for all purposes of this Agreement the equivalent of an amount in any currency
(other than U.S. Dollars) shall be the U.S. Dollar Equivalent of such amount as
of the date of determination. For purposes of this Agreement, except as
otherwise expressly specified herein, all calculations (including, without
limitation, calculations of, "Revolving Credit Commitment", the outstanding
principal amount of "Loans" or "Revolving Credit Loans" or "Money Market Loans",
"Net Worth" and "Majority Banks") shall be computed in, or determined by
reference to, U.S. Dollars.
1.04 SCHEDULES AND EXHIBITS. References to Schedules and Exhibits
"hereto" that are not actually attached hereto shall mean and refer to the
corresponding Schedules and Exhibits that are attached to the Original Credit
Agreement; and references to the "Credit Agreement", the "Amended Credit
Agreement" and the "Notes" in the actual Documents that are in substantially the
form of such Exhibits shall be deemed to refer to this Agreement and the Notes
(as defined herein), respectively.
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Section 2. COMMITMENTS.
2.01 EXTENSIONS OF CREDIT.
I. REVOLVING CREDIT LOANS.
(a) [Intentionally omitted]
(b) REVOLVING CREDIT LOANS. (i) Each U.S. Dollar Bank severally
agrees, on and subject to the terms and conditions of this Agreement, to make
loans in U.S. Dollars to the Company (such Loans hereinafter referred to as
"SERIES A R/C LOANS"), from time to time on any Business Day during the period
from and including the Amendment Effective Date (as defined in the Original
Credit Agreement) to but excluding the Revolving Credit Termination Date in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount of such Bank's Revolving Credit Commitment as in effect from time to
time; provided that in no event shall (A) the Individual Outstanding Obligations
of such Bank exceed the Revolving Credit Commitment of such Bank as in effect
from time to time; (B) the Aggregate Outstanding Obligations of all of the U.S.
Dollar Banks exceed the Revolving Credit Commitments of all of the U.S. Dollar
Banks as in effect from time to time; or (C) the sum of the aggregate amount of
the Revolving Credit Loans of all of the Banks plus the aggregate principal
amount of the Bank Line Loans of all of the Banks exceed the Clean-Down Limit
during a Clean-Down Period. For purposes of the immediately preceding clause
(B), the Revolving Credit Loans made by any Canadian Dollar Bank shall be deemed
to be Revolving Credit Loans of the U.S. Dollar Bank of which such Canadian
Dollar Bank is an Affiliate.
(ii) Subject to the terms and conditions of this Agreement, each U.S.
Dollar Bank that has an Affiliate that is a Canadian Dollar Bank hereby
severally agrees that its Revolving Credit Commitment may be utilized, upon the
request of PSC, in addition to the Series A R/C Loans provided for by clause (i)
of Section 2.01(I)(b) hereof, for loans in Canadian Dollars, which loans may be
made to PSC by such Canadian Dollar Bank at its sole discretion (such loans
hereinafter referred to as "SERIES B R/C
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Loans" or "CANADIAN DOLLAR LOANS"), from time to time on any Business Day
during the period from and including the Amendment Effective Date to but
excluding the Revolving Credit Termination Date in an aggregate principal
amount at any one time outstanding up to but not exceeding the Series B
Sublimit Amount of such Canadian Dollar Bank as in effect from time to time;
provided that the outstanding principal amount of the Series B R/C Loans made
by any Canadian Dollar Bank shall constitute a utilization of the Revolving
Credit Commitment of the U.S. Dollar Bank of which such Canadian Dollar Bank is
an Affiliate in an amount equal to the U.S. Dollar Equivalent of such Loans;
and provided further that in no event shall (A) the aggregate outstanding
principal amount of the Series B R/C Loans exceed the aggregate amount of the
Series B Sublimit; (B) the Individual Outstanding Obligations of the U.S.
Dollar Bank that is an Affiliate of such Canadian Dollar Bank exceed the
Revolving Credit Commitment of such U.S. Dollar Bank as in effect from time to
time; (C) the Aggregate Outstanding Obligations of all of the U.S. Dollar Banks
exceed the Revolving Credit Commitments of all of the U.S. Dollar Banks as in
effect from time to time; or (D) the sum of the aggregate amount of the
Revolving Credit Loans of all of the Banks plus the aggregate principal amount
of the Bank Line Loans of all of the Banks exceed the Clean-Down Limit during a
Clean-Down Period. For purposes of the immediately preceding clause (C), the
Revolving Credit Loans made by any Canadian Dollar Bank shall be deemed to be
Revolving Credit Loans of the U.S. Dollar Bank of which such Canadian Dollar
Bank is an Affiliate.
Subject to the terms of this Agreement, during such period the Company or PSC,
as the case may be, may borrow, prepay (as provided in Section 3.03 hereof) and
reborrow Revolving Credit Loans of each Series (but, in the case of borrowings
or reborrowings, provided that the aggregate amount of all Revolving Credit
Loans of all the Banks shall not exceed the Clean-Down Limit during a
Clean-Down Period after giving effect to such borrowing or reborrowing).
Revolving Credit Loans that are U.S. Dollar Loans may be borrowed or reborrowed
as Base Rate Loans or Eurodollar Loans and the Company may Convert such
Revolving Credit Loans, which are, as the case may be, Base Rate Loans or
Eurodollar Loans, into Revolving Credit Loans of the other type
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(as provided in Section 2.08 hereof); provided that no more than eight
Revolving Credit Loans that are Eurodollar Loans may be outstanding at any one
time. Revolving Credit Loans that are Canadian Dollar Loans may be borrowed or
reborrowed as Canadian Floating Rate Loans or Canadian Discount Rate Loans and
the Company may Convert such Revolving Credit Loans which are, as the case may
be, Canadian Floating Rate Loans or Canadian Discount Rate Loans, into
Revolving Credit Loans of the other type (as provided in Section 2.08 hereof);
provided that no more than six Revolving Credit Loans that are Canadian
Discount Rate Loans may be outstanding at any one time. Revolving Credit Loans
that are Canadian Dollar Loans may be borrowed or reborrowed only as Canadian
Dollar Loans and may not be Converted into U.S. Dollar Loans of any type.
II. LETTERS OF CREDIT. Subject to the terms and conditions hereof, the
Revolving Credit Commitments may be utilized, upon the request of the Company,
in addition to the Revolving Credit Loans provided for by Section 2.01(I)(b)
hereof, by the Issuing Bank of Letters of Credit for account of the Company
denominated in U.S. Dollars during the period from and including the Closing
Date to but not including the Revolving Credit Termination Date in an amount up
to but not exceeding the Letter of Credit Sublimit, provided that (A) the
Aggregate Outstanding Obligations of all of the U.S. Dollar Banks shall in no
event exceed the Revolving Credit Commitments of all of the U.S. Dollar Banks
as in effect from time to time; and (B) all Letters of Credit shall expire or
mature on or prior to the Revolving Credit Termination Date.
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(a) ISSUANCE PROCEDURES. The following provisions shall apply to the
issuance of Letters of Credit
(1) CONDITIONS TO ISSUANCE. The issuanceby the Issuing Bank of
each Letter of Credit shall, in addition to the
conditions set forth in Section 7 hereof, be subject to the
condition precedent that the Company shall have executed and
delivered such other applications, instruments and agreements
relating to such Letter of Credit as the Issuing Bank shall
have reasonably requested consistent with such Issuing Bank's
then current practices and procedures with respect to letters
of credit of the same type. The Issuing Bank shall promptly
notify each Bank (through the U.S. Agent) of the issuance of
each Letter of Credit.
(2) DURATION. No Letter of Credit shall (i) be issued
or extended by the Issuing Bank after the close of business on
the day immediately preceding the Revolving Credit Termination
Date, (ii) have an expiry date later than 360 days after the
date of issuance (exclusive of all periods of extension) or
(iii) have an expiry date (by extension or otherwise) later
than the Revolving Credit Termination Date.
(3) TYPE AND PURPOSE. Each Letter of Credit shall be
issued for account of the Company in the ordinary course of
the business of the Company, subject to the following: (i)
each Commercial Letter of Credit shall be for the purpose of
financing purchases of raw materials, finished goods or
supplies in the ordinary course of business of the Company and
the Subsidiaries; and (ii) each Bond Letter of Credit shall be
for the purpose of supporting the following obligations:
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workmen's compensation obligations of the Company and the
Subsidiaries, obligations with respect to insurance programs
of the Company and the Subsidiaries and obligations with
respect to bid bonds, performance bonds or surety bonds of the
Company and the Subsidiaries or with respect to letters of
credit issued for the account of the Company for purposes
consistent with clause (i) above and this clause (ii), in each
case furnished in the ordinary course of business of the
Company and the Subsidiaries.
All Commercial Letters of Credit shall provide for
payment by the Issuing Bank against presentation of sight
drafts and documents specified by such Commercial Letters of
Credit (or, in the case of standby letters of credit, sight
drafts and drawing certificates specified by such standby
letters of credit). All Bond Letters of Credit shall provide
for payment by the Issuing Bank against presentation of
documentation (satisfactory to the Issuing Bank) demonstrating
the Company's failure to meet obligations subject of such
Letter of Credit.
(4) FEES. The Company shall pay to the Issuing Bank (through
the U.S. Agent) in respect of each Letter of Credit a
letter of credit fee for the period from and including the
date of issuance of such Letter of Credit to and including the
date such Letter of Credit is drawn in full, expires or is
terminated a letter of credit fee at a rate per annum during
each fiscal quarter of the Company that such Letter of Credit
is outstanding on the daily undrawn face amount of such Letter
of Credit equal to the Applicable Margin for Letters of
Credit. Accrued letter of credit
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fees shall be payable quarterly in arrears on each
Quarterly Date. The foregoing letter of credit fees shall be
non-refundable. The U.S. Agent, on behalf of the Issuing
Bank, agrees to pay to each Bank, on the date 10 Business Days
after each Quarterly Date, but only to the extent received by
the U.S. Agent from the Company, an amount equal to such
Bank's Letter of Credit Percentage of all letter of credit
fees described in the preceding sentence received by the
Issuing Bank during the period commencing on (and including)
the Quarterly Date immediately preceding the most recently
ended Quarterly Date through (but not including) the most
recently ended Quarterly Date. In addition to the fees
described above, the Company agrees to pay to the Issuing Bank
for its own account (through the U.S. Agent) (i) a fronting
fee at a rate per annum equal to 1/4 of 1% on the daily
undrawn face amount of each Letter of Credit, payable
quarterly in arrears on each Quarterly Date and (ii) all
commissions, charges, costs and expenses customarily charged
by such Issuing Bank in like circumstances for like customers
with respect to the issuance, amendment or extension of each
Letter of Credit.
(b) REIMBURSEMENT UNDER LETTERS OF CREDIT. Upon receipt from the
beneficiary of any Letter of Credit of any demand for payment under such
Letter of Credit, the Issuing Bank shall promptly notify the Company and
the U.S. Agent of the amount to be paid by the Issuing Bank as a result of
such demand and the date on which payment is to be made to such beneficiary
in respect of such demand, specifying the time, prior to such payment to
the beneficiary (provided that the failure to give such notice prior to
such payment shall not affect
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the Company's obligations under this Section 2.01(II)(b)), by which the
Company is to reimburse the Issuing Bank therefor. The Company shall
immediately reimburse the Issuing Bank (through the U.S. Agent) for
any amounts paid by the Issuing Bank pursuant to any drawing under any
Letter of Credit issued by it, and pay when due all other amounts owing to
the Issuing Bank hereunder and under the terms of the related Letter of
Credit Documents at or prior to the time of each such drawing, without
presentment, demand, protest or other formalities of any kind, together
with interest thereon in accordance with Section 3.02 hereof. The
obligations of the Company to make such payments to the Issuing Bank
(through the U.S. Agent), and the U.S. Agent's right to receive the same
for the account of the Issuing Bank, shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever. Forthwith upon
its receipt of the notice specified in the first sentence of this Section
2.01(II)(b), the U.S. Agent shall give each Bank prompt notice of the
amount of the liability of the Company for failure to reimburse the Issuing
Bank for payment under a Letter of Credit when such reimbursement was due,
specifying such Bank's Letter of Credit Percentage of the amount of such
liability.
(c) LETTER OF CREDIT PAYMENTS. Each Bank shall pay to the U.S. Agent
for account of the Issuing Bank at account number NYA0-D1-900-9-000002
maintained by the U.S. Agent with Chase at the Principal Office in U.S.
Dollars and in immediately available funds, the amount of such Bank's
Letter of Credit Percentage of any Reimbursement Obligation upon notice by
the Issuing Bank (through the U.S. Agent) to such Bank requesting such
payment and specifying such amount. Each Bank's obligation to make such
payments to the U.S. Agent for the
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account of the Issuing Bank under this Section 2.01(II)(c), and the U.S.
Agent's right to receive the same for the account of the Issuing Bank,
shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever, including, without limiting the effect of the
foregoing, the failure of any other Bank to make its payment under this
Section 2.01(II)(c). Each such payment to the U.S. Agent for the account of
the Issuing Bank shall be made without any offset, abatement, withholding
or reduction whatsoever.
(d) PARTICIPATIONS IN LETTER OF CREDIT OBLIGATIONS. Each U.S. Dollar
Bank agrees that it shall automatically acquire a participation in the
Issuing Bank's liability under each Letter of Credit issued hereunder in an
amount equal to such Bank's Letter of Credit Percentage for such Letter of
Credit of such liability, and each U.S. Dollar Bank thereby shall
absolutely, unconditionally and irrevocably assume, as primary obligor and
not as surety, and shall be unconditionally obligated to the Issuing Bank
to pay to the U.S. Agent for the account of the Issuing Bank and discharge
when due pursuant to Section 2.01 (II)(c) hereof, its Letter of Credit
Percentage for such Letter of Credit of the Issuing Bank's liability under
such Letter of Credit. Simultaneously with the making of each payment by a
Bank to the U.S. Agent for the account of the Issuing Bank pursuant to
Section 2.01(II)(c) hereof in respect of any Letter of Credit, such Bank
shall, automatically and without any further action on the part of the U.S.
Agent, the Issuing Bank or such Bank, acquire (i) a participation in an
amount equal to such payment in the Reimbursement Obligation owing by the
Company to the U.S. Agent for the account of the Issuing Bank pursuant to
the Letter of Credit Documents relating to such Letter of Credit; and
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(ii) a participation in a percentage equal to such Bank's Letter of Credit
Percentage for such Letter of Credit in any interest or other amounts
payable by the Company under this Section 2.01(II) and under such Letter of
Credit Documents (other than the fees referred to in the last sentence of
Section 2.01(II)(a)(4) hereof) (such Reimbursement Obligations, interest
and other amounts being herein called the "LETTER OF CREDIT OBLIGATIONS").
Each payment received by the U.S. Agent for the account of the Issuing Bank
in respect of any Letter of Credit Obligation with respect to any Letter of
Credit (including by way of set-off or application of proceeds of any
collateral security for such Letter of Credit Obligations) shall be
promptly paid by the U.S. Agent on behalf of the Issuing Bank to the Banks
entitled thereto (in the case of letter of credit fees, in accordance with
Section 2.01(II)(a)(4) hereof), PRO RATA in accordance with the respective
Letter of Credit Percentages of the Banks for such Letter of Credit. In
the event any payment received by the U.S. Agent for the account of the
Issuing Bank and so paid to the Banks under this Section 2.01(II)(d) is
rescinded or must otherwise be returned by the U.S. Agent on behalf of the
Issuing Bank each Bank shall, upon the request of the Issuing Bank (through
the U.S. Agent), repay to the U.S. Agent for the account of the Issuing
Bank the amount of such payment paid to such Bank, with interest at the
rate specified in Section 2.01(II)(e) hereof.
(e) INTEREST. To the extent that any Bank fails to pay any amount to
the U.S. Agent for the account of the Issuing Bank required to be paid
under this Section 2.01(II) on the due date therefor, such Bank shall pay
interest to the U.S. Agent for the account of the Issuing Bank on such
amount from and including such due date to but excluding the
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date such payment is made (i) during the period from and including such
due date to but excluding the date two Business Days thereafter, at a
rate per annum equal to the Federal Funds Rate (as in effect from time
to time) and (ii) thereafter, at a rate per annum equal to the Base Rate
(as in effect from time to time) PLUS 2%.
(f) INDEMNIFICATION. The Company hereby indemnifies and holds harmless
the Issuing Bank, each Bank and the U.S. Agent from and against any and all
claims and damages, losses, liabilities, costs or expenses that the Issuing
Bank, such Bank or the U.S. Agent may incur (or which may be claimed
against the Issuing Bank, such Bank or the U.S. Agent by any Person
whatsoever) by reason of, or in connection with, the execution and delivery
or transfer of or payment or failure to pay under any Letter of Credit;
provided that the Company shall not be required to indemnify the Issuing
Bank for any claims, damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, caused by (i) the willful misconduct or
gross negligence of the Issuing Bank in determining whether drafts and
other documents presented under any Letter of Credit complied with the
terms of such Letter of Credit or (ii) the Issuing Bank's failure to pay
under any Letter of Credit after the presentation to it of a request
strictly complying with the terms and conditions of such Letter of Credit.
Nothing in this Section 2.01(II) is intended to limit the other obligations
of the Company under this Agreement.
III. MONEY MARKET LOANS.
(a) In addition to borrowings of Revolving Credit Loans, at any time
prior to the Revolving Credit Termination Date the Company may, as set forth in
this Section 2.01(III), request the U.S. Dollar Banks to make offers to make
Money Market Loans
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to the Company in Dollars. The U.S. Dollar Banks may, but shall have no
obligation to, make such offers and the Company may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.01(III). Money Market Loans may be LIBOR Market Loans or Set Rate Loans,
PROVIDED that:
(i) there may be no more than fifteen different Interest Periods for
both Series A R/C Loans and Money Market Loans outstanding at the same
time (for which purpose Interest Periods described in different
lettered clauses of the definition of the term "Interest Period" shall
be deemed to be different Interest Periods even if they are
coterminous); and
(ii) the aggregate principal amount of all Money Market Loans, together
with the aggregate principal amount of all Revolving Credit
Loans and the aggregate amount of all Letter of Credit Liabilities, at
any one time outstanding shall not exceed the aggregate amount of the
Revolving Credit Commitments at such time.
(b) When the Company wishes to request offers to make Money Market
Loans, it shall give the U.S. Agent (which shall promptly notify the U.S. Dollar
Banks) notice (a "MONEY MARKET QUOTE REQUEST") so as to be received no later
than 11:00 a.m. New York time on (x) the fourth Business Day prior to the date
of borrowing proposed therein, in the case of a LIBOR Auction or (y) the
Business Day next preceding the date of borrowing proposed therein, in the case
of a Set Rate Auction (or, in any such case, such other time and date as the
Company and the U.S. Agent, with the consent of the Majority Banks, may agree).
The Company may request offers to make Money Market Loans for up to five
different Interest Periods in a single notice (for which purpose Interest
Periods in different lettered clauses of the definition of the term "Interest
Period" shall be deemed to be different Interest Periods even if they are
coterminous); PROVIDED that the request for each separate Interest Period shall
be deemed to be a separate Money Market Quote Request for a separate borrowing
(a "MONEY MARKET BORROWING"). Each such
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notice shall be substantially in the form of Exhibit H-1 hereto and shall
specify as to each Money Market Borrowing:
(i) the proposed date of such borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Money Market Borrowing, which shall
be at least $5,000,000 (or a larger multiple of $1,000,000) but shall
not cause the limits specified in Section 2.01(III)(a) hereof to be
violated;
(iii) the duration of the Interest Period applicable thereto;
(iv) whether the Money Market Quotes requested for a particular Interest
Period are seeking quotes for LIBOR Market Loans or Set Rate Loans; and
(v) if the Money Market Quotes requested are seeking quotes for Set
Rate Loans, the date on which the Money Market Quotes are to be
submitted if it is before the proposed date of borrowing (the date on which
such Money Market Quotes are to be submitted is called the "QUOTATION
DATE").
Except as otherwise provided in this Section 2.01(III)(b), no Money Market
Quote Request shall be given within five Business Days (or such other number of
days as the Company and the U.S. Agent, with the consent of the Majority Banks,
may agree) of any other Money Market Quote Request.
(c) (i) Each U.S. Dollar Bank may submit one or more Money Market
Quotes, each constituting an offer to make a Money Market Loan in
response to any Money Market Quote Request; PROVIDED that, if the Company's
request under Section 2.01(III)(b) hereof specified more than one Interest
Period, such Bank may make a single submission containing one or more Money
Market Quotes for each such Interest Period. Each Money Market Quote must
be submitted to the U.S. Agent not later than (x) 2:00 p.m. New York time on
the
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fourth Business Day prior to the proposed date of borrowing, in the case of
a LIBOR Auction or (y) 10:00 a.m. New York time on the Quotation Date, in
the case of a Set Rate Auction (or, in any such case, such other time and
date as the Company and the U.S. Agent, with the consent of the Majority
Banks, may agree); PROVIDED that any Money Market Quote may be submitted by
Chase (or its Applicable Lending Office) only if Chase (or such Applicable
Lending Office) notifies the Company of the terms of the offer contained
therein not later than (x) 1:00 p.m. New York time on the fourth Business
Day prior to the proposed date of borrowing, in the case of a LIBOR Auction
or (y) 9:45 a.m. New York time on the Quotation Date, in the case of a Set
Rate Auction. Subject to Sections 5.02(b), 5.03, 7.03 and 10 hereof, any
Money Market Quote so made shall be irrevocable except with the consent of
the U.S. Agent given on the instructions of the Company.
(ii) Each Money Market Quote shall be substantially in the form
of Exhibit H-2 hereto and shall specify:
(A) the proposed date of borrowing and the Interest Period
therefor;
(B) the principal amount of the Money Market Loan for which
each such offer is being made, which principal amount shall be at least
$5,000,000 (or a larger multiple of $1,000,000); PROVIDED that the
aggregate principal amount of all Money Market Loans for which a Bank
submits Money Market Quotes (x) may be greater or less than the
Revolving Credit Commitment of such Bank but (y) may not exceed the
principal amount of the Money Market Borrowing for a particular
Interest Period for which offers were requested;
(C) in the case of a LIBOR Auction, the margin above or below
the applicable LIBO Rate (the "LIBO MARGIN") offered for each such
Money Market Loan, expressed as a percentage (specified to the nearest
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1/10,000th of 1%) to be added to or subtracted from the
applicable LIBO Rate;
(D) in the case of a Set Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) offered for each such
Money Market Loan (the "SET RATE"); and
(E) the identity of the quoting Bank.
Unless otherwise agreed by the U.S. Agent and the Company, no Money Market
Quote shall contain qualifying, conditional or similar language or propose
terms other than or in addition to those set forth in the applicable Money
Market Quote Request and, in particular, no Money Market Quote may be
conditioned upon acceptance by the Company of all (or some specified
minimum) of the principal amount of the Money Market Loan for which such
Money Market Quote is being made, PROVIDED that the submission by any U.S.
Dollar Bank containing more than one Money Market Quote may be conditioned
on the Company not accepting offers contained in such submission that would
result in such Bank making Money Market Loans pursuant thereto in excess of
a specified aggregate amount (the "MONEY MARKET LOAN LIMIT").
(d) The U.S. Agent shall (x) in the case of a Set Rate Auction, as
promptly as practicable after the Money Market Quote is submitted (but in any
event not later than 10:15 a.m. New York time on the Quotation Date) or (y) in
the case of a LIBOR Auction, by 4:00 p.m. New York time on the day a Money
Market Quote is submitted, notify the Company of the terms (i) of any Money
Market Quote submitted by a Bank that is in accordance with Section 2.01(III)(c)
hereof and (ii) of any Money Market Quote that amends, modifies or is otherwise
inconsistent with a previous Money Market Quote submitted by such Bank with
respect to the same Money Market Quote Request. Any such subsequent Money
Market Quote shall be disregarded by the U.S. Agent unless such subsequent Money
Market Quote is submitted solely to correct a manifest error in such former
Money Market Quote. The U.S. Agent's notice to the Company shall specify (A)
the aggregate
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principal amount of the Money Market Borrowing for which offers have been
received and (B) the respective principal amounts and LIBO Margins or Set
Rates, as the case may be, so offered by each Bank (identifying the Bank that
made each Money Market Quote).
(e) Not later than 11:00 a.m. New York time on (x) the third Business
Day prior to the proposed date of borrowing, in the case of a LIBOR Auction or
(y) the Quotation Date, in the case of a Set Rate Auction (or, in any such case,
such other time and date as the Company and the U.S. Agent, with the consent of
the Majority Banks, may agree), the Company shall notify the U.S. Agent of its
acceptance or nonacceptance of the offers so notified to it pursuant to Section
2.01(III)(d) hereof (which notice shall specify the aggregate principal amount
of offers from each Bank for each Interest Period that are accepted, it being
understood that the failure of the Company to give such notice by such time
shall constitute nonacceptance) and the U.S. Agent shall promptly notify each
affected Bank. The notice from the U.S. Agent shall also specify the aggregate
principal amount of offers for each Interest Period that were accepted and the
lowest and highest LIBO Margins and Set Rates that were accepted for each
Interest Period. The Company may accept any Money Market Quote in whole or in
part (PROVIDED that any Money Market Quote accepted in part shall be at least
$5,000,000 or a larger multiple of $1,000,000); PROVIDED that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market Quote
Request;
(ii) the aggregate principal amount of each Money Market Borrowing
shall be at least $5,000,000 (or a larger multiple of $1,000,000) but shall
not cause the limits specified in Section 2.01(III)(a) hereof to be
violated;
(iii) acceptance of offers may, subject to clause (v) below, be made
only in ascending order of LIBO Margins or Set Rates, as the case may be, in
each case beginning with the lowest rate so offered;
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(iv) the Company may not accept any offer where the U.S. Agent has
advised the Company that such offer fails to comply with Section
2.01(III)(c)(ii) hereof or otherwise fails to comply with the requirements
of this Agreement (including, without limitation, Section 2.01(III)(a)
hereof);
(v) the aggregate principal amount of each Money Market Borrowing from
any Bank may not exceed any applicable Money Market Loan Limit of such Bank.
If offers are made by two or more Banks with the same LIBO Margins or Set
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which offers are accepted for the related Interest Period,
the principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Company among such Banks as nearly as
possible (in amounts of at least $5,000,000 or larger multiples of $1,000,000)
in proportion to the aggregate principal amount of such offers. Determinations
by the Company of the amounts of Money Market Loans shall be conclusive in the
absence of manifest error.
(f) Any Bank whose offer to make any Money Market Loan has been
accepted in accordance with the terms and conditions of this Section 2.01(III)
shall, not later than noon New York time on the date specified for the making of
such Loan, make the amount of such Loan available to the U.S. Agent at account
number NYAO-DI-900-9-000002 maintained by the U.S. Agent with Chase at the
Principal Office in immediately available funds, for account of the Company. The
amount so received by the U.S. Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Company on such date by depositing
the same, in immediately available funds, in an account of the Company
maintained with Chase at the Principal Office designated by the Company.
(g) The amount of any Money Market Loan made by any U.S. Dollar Bank
shall not constitute a utilization of such Bank's Revolving Credit Commitment.
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(h) The Company shall pay to the U.S. Agent a fee of $1,500 each time
the Company gives to the U.S. Agent a notice in the form of Exhibit H-1 hereto.
2.02 BORROWINGS OF REVOLVING CREDIT LOANS.
(a) BORROWINGS OF SERIES A R/C LOANS. The Company shall give the U.S.
Agent (which shall promptly notify the Banks) notice of each borrowing of
Series A R/C Loans hereunder as provided in Section 4.05 hereof. Not later
than noon New York time on the date specified for each borrowing of Series A
R/C Loans hereunder, each U.S. Dollar Bank shall make available to the U.S.
Agent the amount of the Loan to be made by it on such date, at account
number NYAO-DI-900-9-000002 maintained by the U.S. Agent with Chase at the
Principal Office, in immediately available funds, for account of the
Company. The amount so received by the U.S. Agent shall, subject to the
terms and conditions of this Agreement, be made available to the Company by
depositing the same, in immediately available funds, in an account of the
Company maintained with Chase at the Principal Office designated by the
Company (or in such other manner as may be specified by the Company and is
reasonably acceptable to the U.S. Agent).
(b) BORROWINGS OF CANADIAN DOLLAR LOANS. PSC shall give the Canadian
Agent (which shall promptly notify each U.S. Dollar Bank that has an
Affiliate that is a Canadian Dollar Bank) notice of each borrowing of Series
B R/C Loans hereunder as provided in Section 4.05 hereof. Not later than
11:00 a.m. Toronto time on the date specified for each borrowing of Series B
R/C Loans hereunder, each such U.S. Dollar Bank shall make (unless its
affiliated Canadian Dollar Bank shall have made) available to the Canadian
Agent the amount of the Series B R/C Loan to be made by it on such date, at
The Royal Bank of Canada, Correspondent Banking Division, Main Branch,
Toronto, Ontario, Canada, for credit to the account of The Chase Manhattan
Bank of Canada, account number 219-247-4 in immediately available funds, for
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further credit to the account of PSC. The amount so received by the
Canadian Agent shall, subject to the terms and conditions of this
Agreement, be made available to PSC by depositing the same, in immediately
available funds, in an account of PSC maintained with Chase Canada at the
Canadian Office designated by PSC (or in such other manner as may be
specified by PSC and is reasonably acceptable to the Canadian Agent).
(C) ISSUANCE OF LETTERS OF CREDIT. The Company shall give the Issuing
Bank (through the U.S. Agent) notice of each issuance of a Letter of Credit
as provided in Section 4.05 hereof (and the U.S. Agent shall promptly notify
each Bank). Each Letter of Credit shall be made available to the Company in
a manner (consistent with the Issuing Bank's customary procedures) to be
agreed upon by the Company and the Issuing Bank at the time of issuance.
2.03 CHANGES OF COMMITMENTS. The relevant Borrower shall have the
right to terminate or reduce (through reduction of the amounts thereof
apportioned to either Series of Loans) the unused amount of the Revolving Credit
Commitments (for which purpose the amount of any Money Market Loans shall be
deemed to be pro rata (based on the Revolving Credit Commitments) utilization of
each Bank's Revolving Credit Commitment) available to it at any time or from
time to time, provided that (i) such Borrower shall give notice of each such
termination or reduction as provided in Section 4.05 hereof; and (ii) each
partial reduction of the Revolving Credit Commitments shall be in an aggregate
amount at least equal to U.S.$5,000,000.
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2.04 FEES.
(a) FACILITY FEES. (i) The Company shall pay to the U.S. Agent for
the account of each U.S. Dollar Bank a facility fee (in U.S. Dollars) on the
daily average amount of such U.S. Dollar Bank's Revolving Credit Commitment for
the period from and including the Amendment Effective Date to but excluding the
earlier of the date the Revolving Credit Commitment is terminated and the
Revolving Credit Termination Date, at a rate per annum during each fiscal
quarter of the Company equal to the Applicable Margin for facility fees. Accrued
facility fees shall be payable in arrears on each Quarterly Date (commencing
June 30, 1995) and on the dates referred to in the preceding sentence.
(ii) [Intentionally omitted]
(b) OTHER FEES. The Company shall pay to the U.S. Agent the fees
provided for in the letter agreement dated March 7, 1994 between the Company and
Chase on the dates and in the amounts specified therein.
2.05 LENDING OFFICES. The Loans of each type made by each Bank and
such Bank's participation in Letter of Credit Liabilities shall be made and
maintained at such Bank's Applicable Lending Office for Loans of such type and
such participation.
2.06 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of any
Bank to make any Loan to be made by it on the date specified therefor or to make
any payment required to be made by it in accordance with Section 2.01(II) hereof
shall not relieve any other Bank of its obligation to make its Loan, or to make
any such payment, on such date, and neither any Bank nor either Agent shall be
responsible for the failure of any other Bank to make a Loan, or to make any
such payment, to be made by such other Bank. The amounts payable by either
Borrower at any time hereunder and under the Notes of said Borrower to each Bank
or the Issuing Bank shall be a separate and independent debt of said Borrower
and each Bank or the Issuing Bank shall be entitled to protect and enforce its
rights arising out of this Agreement and its Notes,
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and it shall not be necessary for any other Bank, the Issuing Bank or either
Agent to consent to, or be joined as an additional party in, any proceedings
for such purposes.
2.07 NOTES.
(a) MONEY MARKET NOTES. The Money Market Loans made by each U.S.
Dollar Bank shall be evidenced by a single promissory note of the Company in
substantially the form of Exhibit A-1 hereto, dated the Restatement Date,
payable to such Bank and otherwise duly completed.
(b) REVOLVING CREDIT LOAN NOTES. The Series A R/C Loans made by each
U.S. Dollar Bank shall be evidenced by a single promissory note of the
Company (each a "SERIES A R/C NOTE") in substantially the form of Exhibit
A-2 hereto, dated the Closing Date, payable to the order of such U.S. Dollar
Bank in a principal amount equal to the amount of such U.S. Dollar Bank's
Revolving Credit Commitment as in effect on the Amendment Effective Date and
otherwise duly completed. The Series B R/C Loans made by each Canadian
Dollar Bank shall be evidenced by a single promissory note of PSC (each a
"SERIES B R/C NOTE") in substantially the form of Exhibit A-3 hereto, dated
the Closing Date, payable to the order of such Canadian Dollar Bank in a
principal amount effectively equal to such Canadian Dollar Bank's Series B
Sublimit Amount as in effect on the Amendment Effective Date and otherwise
duly completed. PSC hereby agrees to furnish to any Canadian Dollar Bank a
duly executed and delivered replacement Series B R/C Note upon the request
of such Canadian Dollar Bank if at the time of such request the stated
principal amount of such Canadian Dollar Bank's Series B R/C Note is less
than such Canadian Dollar Bank's Series B Sublimit Amount.
(c) LETTER OF CREDIT NOTE. The Letter of Credit Obligations of the
Company payable to the Issuing Bank shall be evidenced by a promissory note
of the Company (a "LETTER OF CREDIT NOTE") in substantially the form of
Exhibit A-4 hereto, dated the Closing Date, payable to the order of the
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Issuing Bank in a principal amount equal to the amount of the Letter of
Credit Sublimit and otherwise duly completed.
(d) LOAN RECORDS. Each Loan made by each Bank (or, in the case of the
Letter of Credit Note, each Reimbursement Obligation arising upon a drawing
under a Letter of Credit), all payments and prepayments made on account of
the principal thereof, and, if applicable, all Conversions of any Loans
shall be recorded by such Bank (or, in the case of the Letter of Credit
Note, the Issuing Bank) on its books and, prior to any transfer of the Note
held by it evidencing such Loan, endorsed by such Bank (or, in the case of
the Letter of Credit Note, the Issuing Bank) on the schedule attached to
such Note or any continuation thereof; provided that any failure by such
Bank (or, in the case of the Letter of Credit Note, the Issuing Bank) to
make any such endorsement (or any error in such endorsement) shall not
affect the obligations of the relevant Borrower hereunder or under such Note
in respect of such Loans (or, in the case of the Letter of Credit Note, such
Reimbursement Obligations).
(e) SUBDIVISION OF NOTES. No Bank shall be entitled to have its Notes
subdivided, by exchange for promissory notes of lesser denominations or
otherwise, except in connection with a permitted assignment of all or any
portion of such Bank's Revolving Credit Commitment, Loans and Notes pursuant
to Section 12.06 hereof. The Letter of Credit Note may not be subdivided.
2.08 CONVERSION OR CONTINUATION OF LOANS. Subject to Sections 4 and 5
hereof, the Company shall have the right to Convert Revolving Credit Loans of
one type into Revolving Credit Loans of another type or Continue Revolving
Credit Loans of one type as Revolving Credit Loans of the same type, at any time
or from time to time, provided that (a) the Company shall give the U.S. Agent
(which shall notify the Canadian Agent in the case of Canadian Dollar Loans)
notice of each such Conversion or Continuation as provided in Section 4.05
hereof, (b) Fixed Rate Loans may be Converted only on the last day of an
Interest Period for such Loans; and (c) the Company may not Convert Base Rate
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Loans or Canadian Floating Rate Loans into, or Continue Fixed Rate Loans as,
Fixed Rate Loans if an Event of Default has occurred and is continuing.
2.09 EXTENSION OF REVOLVING CREDIT TERMINATION DATE.
(a) The Company may, by notice to the U.S. Agent (which shall promptly
deliver a copy to each of the U.S. Dollar Banks) during the Extension Request
Period (as defined below), request that the Banks extend the Revolving Credit
Termination Date then in effect (the "EXISTING TERMINATION DATE") for the
Additional Period from the Existing Termination Date. Each U.S. Dollar Bank,
acting in its sole discretion, shall, by notice to the Company and the U.S.
Agent given on or before the Consent Date, advise the Company whether or not the
U.S. Dollar Bank agrees to such extension; PROVIDED that each Bank that
determines not to extend the Existing Termination Date (a "NON-EXTENDING BANK")
shall notify the U.S. Agent (which shall notify the Company) of such fact
promptly after such determination (but in any event no later than the Consent
Date) and any U.S. Dollar Bank that does not advise the Company on or before the
Consent Date shall be deemed to be a Non-extending Bank. The election of any
U.S. Dollar Bank to agree to such extension shall not obligate any other U.S.
Dollar Bank to agree.
(b) If (and only if) U.S. Dollar Banks holding Revolving Credit
Commitments that aggregate at least 66 2/3% of the aggregate amount of the
Revolving Credit Commitments shall have agreed by the Consent Date to extend the
Existing Termination Date, then the Company shall have the right on or before
the Extension Date to replace each Non-extending Bank with, and otherwise add to
this Agreement, one or more other banks (which may include any Bank, each prior
to the Extension Date an "ADDITIONAL COMMITMENT BANK") with the approval of the
Agents (which approval shall not be unreasonably withheld), each of which
Additional Commitment Banks shall have entered into an agreement in form and
substance satisfactory to the Company and the Agents pursuant to which such
Additional Commitment Bank shall, effective as of the Extension Date, undertake
a Revolving Credit Commitment (if any such Additional Commitment Bank is a
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Bank, its Revolving Credit Commitment shall be in addition to such Bank's
Revolving Credit Commitment hereunder on such date). For the purposes hereof,
if a Non-extending Bank has an Affiliate that is a Canadian Dollar Bank, the
Company shall replace such Non-extending Bank with an Additional Commitment
Bank that has a Canadian Affiliate.
(c) If (and only if) U.S. Dollar Banks holding Revolving Credit
Commitments that, together with the additional Revolving Credit Commitments of
the Additional Commitment Banks that will become effective on the Extension
Date, aggregate 100% of the aggregate amount of the Revolving Credit Commitments
(not including the additional Revolving Credit Commitments of the Additional
Commitment Banks) on the Consent Date shall have agreed on or before the
Extension Date to extend the Existing Termination Date, then, effective as of
the Extension Date, the Existing Termination Date shall be extended for the
Additional Period after the Existing Termination Date (PROVIDED, if such date is
not a Business Day, then such Termination Date as so extended shall be the next
preceding Business Day) and on the Extension Date each Additional Commitment
Bank shall thereupon become a "Bank" for all purposes of this Agreement.
Notwithstanding the foregoing, the extension of the Existing Termination Date
shall not be effective with respect to any Bank unless:
(i) no Default shall have occurred and be continuing on the Extension
Date;
(ii) each of the representations and warranties of the Company in
Section 8 hereof shall be true and correct on and as of the Extension Date
with the same force and effect as if made on and as of each such date (or,
if any such representation and warranty is expressly stated to have been
made as of a specific date, as of such specific date); and
(iii) with respect to the initial extension pursuant to this Section
2.09, PSC shall have executed and delivered to the Canadian Agent for
registration in all jurisdictions where the Canadian Security Documents are
registered
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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appropriate renewals with respect to all of the Canadian Security Documents
(if required) to extend the expiration dates thereof 10 years beyond the
Existing Termination Date.
For purposes of this Section 2.09, the following terms shall have the following
meanings:
"ADDITIONAL PERIOD" shall mean one year; provided that the first time
that an extension is requested by the Company pursuant to clause (a) of this
Section 2.09 that is not agreed to by all of the U.S. Dollar Banks on the
Consent Date but is agreed to by all of the U.S. Dollar Banks (including the
Additional Commitment Banks) on the Extension Date, the Additional Period
shall be one year and 45 days, but thereafter shall be one year.
"CONSENT DATE" shall mean April 30 in each year commencing with April
30, 1995; provided that, if any such date is not a Business Day, the
relevant Consent Date shall be the next succeeding Business Day.
"EXTENSION REQUEST PERIOD" shall mean the period from March 1 to and
including March 31 in each year.
"EXTENSION DATE" shall mean, collectively, July 30 in each year
commencing with July 30, 1995; provided that, if any such date is not a
Business Day, the relevant Extension Date shall be the next succeeding
Business Day.
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Section 3. REPAYMENT OF PRINCIPAL; INTEREST; PREPAYMENT.
3.01 REPAYMENT OF LOANS.
(a) MONEY MARKET LOANS. The Company shall pay to the U.S. Agent for
account of each Bank that makes any Money Market Loan the principal amount
of such Money Market Loan, and such Money Market Loan shall mature, on the
last day of the Interest Period for such Money Market Loan.
(b) REVOLVING CREDIT LOANS. The Company or PSC, as applicable, shall
pay to the relevant Agent in the appropriate currency for account of each
U.S. Dollar Bank and each Canadian Dollar Bank, as the case may be, in full
the aggregate outstanding principal amount of such Bank's Revolving Credit
Loans on, and each Revolving Credit Loan shall mature on, the Revolving
Credit Termination Date.
3.02 INTEREST.
(a) REGULAR INTEREST ON CERTAIN LOANS. The Company or PSC, as
applicable, shall pay to the relevant Agent in the appropriate currency for
account of each U.S. Dollar Bank and each Canadian Dollar Bank, as the case
may be, interest on the unpaid principal amount of each Loan of such Bank to
such Borrower for the period commencing on and including the date of such
Loan to but excluding the date such Loan is paid in full, at the following
rates per annum:
(i) with respect to any U.S. Dollar Loan, during any period while such
Loan is a Base Rate Loan, the Base Rate (as in effect from time to time)
plus the Applicable Margin (if any) therefor;
(ii) with respect to any U.S. Dollar Loan, during any period while such
Loan is a Eurodollar Loan, for each Interest Period relating thereto, the
Fixed Rate for such Loan for such Interest Period PLUS the Applicable
Margin therefor;
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(iii) with respect to any U.S. Dollar Loan, during any period while
such Loan is a LIBOR Market Loan, the LIBO Rate for such Loan for the
Interest Period therefor PLUS (or MINUS) the LIBO Margin quoted by the Bank
making such Loan in accordance with Section 2.01(III) hereof;
(iv) with respect to any U.S. Dollar Loan, during any period while such
Loan is a Set Rate Loan, the Set Rate for such Loan for the Interest Period
therefor quoted by the Bank making such Loan in accordance with Section
2.01(III) hereof;
(v) with respect to any Canadian Dollar Loan, during any period while
such Loan is a Canadian Floating Rate Loan, the Canadian Floating Rate (as
in effect from time to time) PLUS the Applicable Margin (if any) therefor;
and
(vi) with respect to any Canadian Dollar Loan, during any period while
such Loan is a Canadian Discount Rate Loan, the Canadian Discount Rate (as
in effect from time to time) PLUS the Applicable Margin therefor.
(b) POST-DEFAULT INTEREST. Notwithstanding the provisions of clause
(a) above, the Company or PSC, as applicable, shall pay to the relevant Agent in
the appropriate currency for account of each Bank interest at the applicable
Post-Default Rate (to the fullest extent permitted by law) on any principal of
any Loan of such Bank to such Borrower, on any Reimbursement Obligation and (to
the fullest extent permitted by law) on any interest or other amount payable by
such Borrower hereunder or under any Note held by such Bank, which is not paid
in full when due (whether at stated maturity, by acceleration or otherwise), for
the period commencing on and including the due date thereof to but excluding the
date the same is paid in full.
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(c) PAYMENT OF INTEREST. Accrued interest on each Loan shall be
payable (i) in the case of a Base Rate Loan or a Canadian Floating Rate Loan, on
each Quarterly Date in each year, (ii) in the case of a Fixed Rate Loan or a
Money Market Loan, on the last day of each Interest Period therefor, and, if
such Interest Period is longer than three months (in the case of Eurodollar
Loans or LIBOR Market Loans) or 90 days (in the case of Canadian Discount Rate
Loans or Set Rate Loans), at three-month or 90 day intervals, as the case may
be, respectively, following the first day of such Interest Period and (iii) in
the case of any Loan, upon the payment or prepayment thereof or the Conversion
of such Loan to a Loan of the other type (but only on the principal amount so
paid, prepaid or Converted); provided that interest payable at the Post-Default
Rate shall be payable from time to time on demand of the relevant Agent (and on
the date that the underlying obligation is paid in full) and interest on any
Fixed Rate Loan that is Converted into a Base Rate Loan or a Canadian Floating
Rate Loan, as the case may be (pursuant to Section 5.04 hereof), shall be
payable on the date of Conversion (but only to the extent so Converted).
(d) NOTICE OF INTEREST RATE. Promptly after the determination of any
interest rate provided for herein or any change therein, the U.S. Agent shall
notify the U.S. Dollar Banks and the Company thereof with respect to affected
U.S. Dollar Loans and the Canadian Agent shall notify the Canadian Dollar Banks
and PSC (with a copy to the Company) thereof with respect to Canadian Dollar
Loans.
3.03 PREPAYMENTS.
(a) [Intentionally omitted]
(b) OPTIONAL PREPAYMENT OF LOANS. Each Borrower shall have the right to
prepay the Revolving Credit Loans made to such Borrower in whole or in part,
subject to giving the relevant Agent prior notice in accordance with the
provisions of Section 4.05 hereof; provided that (i) each
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such prepayment shall be in the aggregate principal amount of not less than the
applicable minimum amount specified in Section 4.04 hereof; and (ii) in the
case of Fixed Rate Loans, such prepayment may be made only on the last day of
the Interest Period therefor. Money Market Loans may not be prepaid.
(c) MANDATORY PREPAYMENTS. The relevant Borrower shall make the
following mandatory prepayments (and as to application of such mandatory
prepayments, in accordance with the last paragraph of this Section 3.03(c)):
(i) ISSUANCE. Upon any Issuance, the Company shall prepay the Loans in
an aggregate principal amount, and the Revolving Credit Commitments shall be
subject to automatic reduction in an aggregate amount, equal to 100% of the
aggregate amount of all cash received by the Company and its Subsidiaries in
respect of such Issuance net of reasonable expenses incurred by the Company and
its Subsidiaries in connection therewith.
(ii) [Intentionally omitted]
(iii) DISPOSITIONS.
(A) If at any time during any Computation Period, Net Disposition
Proceeds exceed U.S.$5,000,000 (or a U.S. Dollar Equivalent) the relevant
Borrower shall on the last day of such Computation Period prepay the Loans
in an aggregate principal amount, and the Revolving Credit Commitments shall
be subject to automatic reduction in an aggregate amount, equal to such
excess (less amounts theretofore prepaid pursuant to this Section
3.03(c)(iii)(A) during such Computation Period) (rounded upwards in each
case to the nearest U.S.$1,000).
(B) [Intentionally omitted]
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(iv) CASUALTY INSURANCE PROCEEDS. On the last day of each fiscal
quarter of the Company, the relevant Borrower shall prepay the Loans in an
aggregate principal amount, and the Revolving Credit Commitments shall be
subject to automatic reduction in an aggregate amount, equal to the amount by
which the Net Casualty Insurance Proceeds for the Computation Period ending on
or most recently ended prior to such date (less amounts theretofore prepaid
pursuant to this Section 3.03(c)(iv) during such Computation Period) exceeds
U.S.$5,000,000 (or a U.S. Dollar Equivalent) (rounded upwards to the nearest
U.S.$1,000).
(v) [Intentionally omitted]
(vi) CLEAN-DOWN LIMIT. If on any day during a Clean-Down Period the
aggregate outstanding principal amount of the Loans shall exceed the Clean-Down
Limit for such Clean-Down Period, the relevant Borrower shall forthwith prepay
Loans in an amount (rounded upwards to the nearest U.S.$1,000) such that after
giving effect to such prepayment the aggregate outstanding principal amount of
Loans is equal to or less than such Clean-Down Limit.
Prepayments pursuant to this Section 3.03(c) shall be applied first to
the Revolving Credit Loans (first to Series A R/C Loans, then to Series B R/C
Loans and, if applicable, as within Series A R/C Loans, first to Base Rate Loans
and then to Eurodollar Loans and within Series B R/C Loans, first to Canadian
Floating Rate Loans and then to Canadian Discount Rate Loans) and then to Money
Market Loans; provided that, in the case of prepayments pursuant to Section
3.03(c)(i), 3.03(c)(iii) or 3.03(c)(iv) hereof made as a consequence of proceeds
of: (1) an Issuance by PSC, Net Disposition Proceeds of PSC or Net Casualty
Insurance Proceeds of PSC, as applicable, PSC shall prepay Series B R/C Loans
(notwithstanding the first parenthetical phrase of this paragraph) (but without
affecting the obligation of the Company to make prepayments in accordance with
such application priorities to the extent that such prepayment by PSC is less
than the full amount of the required
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prepayment); and (2) an Issuance by the Company, Net Disposition Proceeds of
the Company or Net Casualty Insurance Proceeds of the Company, required
prepayments of Series B R/C Loans may be made by PSC. Each prepayment shall,
in accordance with Section 3.02(c) hereof, be accompanied by interest on the
principal amount prepaid through the date of prepayment, together with amounts,
if any, payable pursuant to Section 5.05 hereof (subject to clause (ii) of the
next succeeding sentence). Anything in the foregoing to the contrary
notwithstanding, (i) in the event that as a result of any prepayment required
to be made pursuant to this Section 3.03(c) the Revolving Credit Loans (other
than the Series B R/C Loans) would be prepaid in full, prior to applying the
remaining portion of the amount to be prepaid to Series B R/C Loans, the amount
to be prepaid shall first be applied to cash collateralize outstanding Letter
of Credit Liabilities through a deposit in the Cash Collateral Account in an
amount not exceeding such outstanding Letter of Credit Liabilities, (ii) in the
event that all or a portion of any prepayment (a "SUBJECT PREPAYMENT") required
to be made pursuant to this Section 3.03(c) would result in amounts becoming
payable under Section 5.05 hereof, the Company may, upon written notice to the
relevant Agent (which may be included in the notice otherwise required by
Section 4.05 hereof in conjunction with the Subject Prepayment) deposit in the
Cash Collateral Account or the Canadian Cash Collateral Account, as the case
may be, an amount equal to the amount of the Subject Prepayment for application
to the relevant Fixed Rate Loans on the last day of the then current Interest
Period(s) therefor and (iii) except to the extent that the provisions of
Section 6 hereof are applicable and without affecting any obligations of either
Borrower with respect to its Loans, (a) except for Series B R/C Loans, PSC
shall not be obligated to make any payments under this Section 3.03(c) on the
Series A R/C Loans or in respect of clause (i) of this sentence and (b) the
Company shall not be obligated to make any payments under this Section 3.03(c)
on the Series B R/C Loans.
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Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except with respect to Canadian Dollar Loans, amounts payable to
Canadian Banks pursuant to Section 5 hereof and to the extent otherwise
expressly provided herein, all payments of principal, interest and other amounts
to be made by any Obligor under this Agreement and the Notes (other than the
Series B R/C Notes) (and all payments by any other Obligor in respect of such
principal, interest or other amounts) shall be made in U.S. Dollars, in
immediately available funds, to the U.S. Agent at account number
NYAO-DI-900-9-000002 maintained by the U.S. Agent at the Principal Office, not
later than noon New York time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day). All payments of principal,
interest and other amounts to be made by PSC under this Agreement (including,
without limitation, amounts payable to Canadian Banks pursuant to Section 5
hereof and amounts payable under the Series B R/C Notes (and all payments by any
other Obligor in respect of such principal, interest or other amounts)) shall,
except as otherwise expressly provided herein, be made in Canadian Dollars, in
immediately available funds, to The Royal Bank of Canada, Correspondent Banking
Division, Main Branch, Toronto, Ontario, Canada for credit to the account of The
Chase Manhattan Bank of Canada, account number 219-247-4 not later than 11:00
a.m. Toronto time on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day).
(b) Each Obligor shall, at the time of making each payment under this
Agreement or any Note, specify to the relevant Agent the Loans or other amounts
payable by such Obligor hereunder to which such payment is to be applied
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(and in the event that it fails to so specify, or if an Event of Default has
occurred and is continuing, (i) in the case of any U.S. Dollar payment, the
U.S. Agent may distribute such payment to the U.S. Dollar Banks and the Issuing
Bank in such manner as it or the Majority Banks may determine to be
appropriate, subject to Section 4.02 hereof or (ii) in the case of any Canadian
Dollar payment, the Canadian Agent may distribute such payment to the Canadian
Dollar Banks in such manner as it or the Canadian Dollar Banks may determine to
be appropriate, subject to Section 4.02 hereof.
(c) Each payment received by either Agent under this Agreement or any
Note for account of a Bank or the Issuing Bank shall be paid promptly to such
Bank or the Issuing Bank, in immediately available funds in the appropriate
currency (following conversion from one currency to the appropriate currency (if
necessary) in accordance with customary bank practice and procedures), for
account of such Bank's Applicable Lending Office for the Loan or participation
in Letter of Credit Liabilities in respect of which such payment is made or the
Issuing Bank, as the case may be.
(d) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day which is not a Business Day such date shall
(unless otherwise expressly provided herein) be extended to the next succeeding
Business Day and interest shall be payable for any principal so extended for the
period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise expressly
provided herein:
(a) each borrowing of Revolving Credit Loans in U.S. Dollars hereunder
shall be made from the U.S. Dollar Banks PRO RATA according to the then
unused amounts of their respective Revolving Credit Commitments (for which
purpose (x) the outstanding principal amount of any Canadian Dollar Loans
owing to the Canadian Dollar Bank that is an Affiliate
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of such U.S. Dollar Bank shall constitute a utilization of the Revolving
Credit Commitment of such U.S. Dollar Bank (in the U.S. Dollar
Equivalent of such Loans) and (y) the Outstanding Letter of Credit
Liabilities of any U.S. Dollar Bank shall constitute a utilization of the
Revolving Credit Commitment of such U.S. Dollar Bank), each borrowing of
Canadian Dollar Loans shall be made from the Canadian Dollar Banks PRO RATA
according to the then amounts of the respective Series B Sublimit Amounts of
the U.S. Dollar Banks that are Affiliates of such Canadian Dollar Banks;
each payment of fees under Section 2.04(a)(i) hereof shall be made for
account of the U.S. Dollar Banks PRO RATA according to the then unused
amounts of their respective Revolving Credit Commitments; and each
termination or reduction of the amount of the Revolving Credit Commitments
shall be applied to such Revolving Credit Commitments of the U.S. Dollar
Banks PRO RATA according to the amounts of their respective Revolving Credit
Commitments;
(b) the making, Conversion and Continuation of Revolving Credit Loans
of a particular type (except as otherwise provided in Section 5) shall be
PRO RATA among the (x) U.S. Dollar Banks according to the amounts of their
respective Revolving Credit Commitments or (y) Canadian Dollar Banks
according to the amounts of their respective Series B Sublimit Amounts; and
(c) each payment and prepayment by the Company of principal of or
interest on Revolving Credit Loans of a particular type shall be made to the
relevant Agent for account of the Banks holding Loans of such type PRO RATA
in accordance with the respective unpaid principal amounts thereof.
4.03 COMPUTATIONS. Interest on Eurodollar Loans and Money Market Loans
and letter of credit fees under Section 2.02(II)(a)(4) hereof shall be computed
on a per annum basis and on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable and interest on Base
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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Rate, Canadian Discount Rate Loans and Canadian Floating Rate Loans, interest
referred to in Sections 2.01(II)(e) and 4.06 hereof and facility fees shall be
computed on a per annum basis and on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed (including the first day but excluding
the last day) occurring in the period for which payable.
4.04 MINIMUM AMOUNTS. Except for Conversions or prepayments made
pursuant to Section 5.04 hereof, each borrowing, optional prepayment or
Conversion of Base Rate Loans shall be in an amount of U.S.$1,000,000 or an
integral multiple of U.S.$1,000,000 in excess thereof, each borrowing,
Conversion or Continuation of Eurodollar Loans shall be in an amount of
U.S.$1,000,000 or an integral multiple of U.S.$1,000,000 in excess thereof, each
borrowing and optional prepayment of Canadian Floating Rate Loans shall be in an
amount of CAN$250,000 or an integral multiple of CAN$250,000 and each borrowing,
Conversion or Continuation of Canadian Discount Rate Loans shall be in an amount
of CAN$500,000 or an integral multiple of CAN$500,000 (borrowings, optional
prepayments, Conversions or Continuations of or into Revolving Credit Loans of
different types or, in the case of Fixed Rate Loans, having different Interest
Periods at the same time hereunder to be deemed separate borrowings or
Conversions for purposes of the foregoing, one for each type or Interest
Period). Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of (x) Eurodollar Loans having the same Interest
Period shall be at least U.S.$1,000,000 and (y) Canadian Discount Rate Loans
having the same Interest Period shall be at least CAN$500,000, and, if any
Eurodollar Loans or Canadian Discount Rate Loans would otherwise be in a lesser
principal amount for any period, such Loans shall be Base Rate Loans or Canadian
Floating Rate Loans, as the case may be, during such period.
4.05 CERTAIN NOTICES. Except as provided in Section 2.01(III) with
respect to Money Market Loans, notices by either Borrower to the relevant Agent
of terminations or reductions of Revolving Credit Commitments, of borrowings,
Conversions, Continuations and prepayments of Loans, of type of
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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Loans, of the duration of Interest Periods and of issuances of Letters of
Credit shall be irrevocable and shall be effective only if received by the
relevant Agent not later than 11:00 a.m. New York time or 11:00 a.m. Toronto
time, as applicable, on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing, Conversion, Continuation,
prepayment or issuance or the first day of such Interest Period specified
below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination or
reduction of Revolving
Credit Commitments 3
Borrowing or prepayment of,
or Conversion into,
Base Rate Loans Same Day
Borrowing or prepayment of,
Conversion into, Continuation as,
or duration of Interest Period
for, Eurodollar Loans 3
Borrowing or prepayment of,
Canadian Floating Rate Loans Same Day
Borrowing or prepayment of,
Conversion into, Continuation as,
or duration of Interest Period
for, Canadian Discount Rate
Loans 1
Issuance of Letters of Credit 1
</TABLE>
Each such notice of termination or reduction shall specify the aggregate amount
of the Revolving Credit Commitments to be terminated or reduced. Each such
notice of borrowing,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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Conversion, Continuation or prepayment shall specify the type of Loans to be
borrowed, Converted, Continued or prepaid and the amount (subject to Section
4.04 hereof) and type and Series of the Loans to be borrowed, Converted,
Continued or prepaid (and, in the case of a Conversion, the type of Loans to
result from such Conversion) and the date of borrowing, Conversion,
Continuation or prepayment (which shall be a Business Day). Each such notice
of the duration of an Interest Period shall specify the Loans to which such
Interest Period is to relate. Each such notice of the issuance of a Letter of
Credit shall specify the type of Letter of Credit, the amount thereof, the
expiry date thereof, the name of the beneficiary thereof and the drawing
conditions therefor. The relevant Agent shall promptly notify the Banks and
the other Agent of the contents of each such notice. In the event that such
Borrower fails to select the type of Loan, or the duration of any Interest
Period, for any Fixed Rate Loan within the time period and otherwise as
provided in this Section 4.05, such Loan (if outstanding as a Fixed Rate Loan)
will be automatically Converted into a Base Rate Loan or Canadian Floating Rate
Loan, as the case may be, on the last day of the then current Interest Period
for such Loan or (if outstanding as a Base Rate Loan or a Canadian Floating
Rate Loan) will remain as, or (if not then outstanding) will be made as, a Base
Rate Loan or a Canadian Floating Rate Loan, as the case may be. In addition,
the Company shall submit a copy of any notice delivered to an Agent pursuant to
this Section 4.05 to the other Agent, conspicuously marked at the top to read
"For information only".
4.06 NON-RECEIPT OF FUNDS BY THE AGENTS. Unless the relevant Agent
shall have been notified by a Bank or the relevant Borrower prior to the date on
which it is scheduled to make payment to such Agent of (in the case of a Bank)
the proceeds of a Loan to be made by it hereunder or (in the case of such
Borrower) a payment to such Agent for account of one or more of the Banks
hereunder (such payment being herein called the "REQUIRED PAYMENT"), which
notice shall be effective upon receipt by such Agent, that it does not intend to
make the Required Payment to such Agent, such Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date and, if such Bank or such Borrower has not
in fact made the Required Payment to such Agent, the recipient(s) of such
payment shall, on demand, repay to such Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on and including the date such amount was so made available by such
Agent until the date such Agent recovers such amount at a rate per annum equal
to the Federal Funds Rate in the case of U.S. Dollar Loans, and, in the case of
Canadian Dollar Loans, 2% in excess of the Canadian Floating Rate (to the
fullest extent permitted by law), for such day.
4.07 SHARING OF PAYMENTS; ETC.
(a) Each Obligor agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Bank or the
Issuing Bank may otherwise have, each Bank and the Issuing Bank shall be
entitled, at its option, to setoff and apply balances held by it for account
of such Obligor, at any of its offices, in U.S. Dollars or in any other
currency, against any principal of or interest on any of such Bank's Loans
to such Obligor (or, in the case of the Issuing Bank, Reimbursement
Obligations and interest thereon), such Obligor's obligations under Section
6.01 hereof, or any other amount payable by such Obligor to such Bank or the
Issuing Bank hereunder, which is not paid when due (regardless of whether
such balances are then due to such Obligor), in which case it shall promptly
notify such Obligor and each Agent thereof, provided that such Bank's or
Issuing Bank's failure to give such notice shall not affect the validity
thereof.
(b) If any Bank shall obtain payment of any principal of or interest
on any Loan of any type made by it to any Obligor through the exercise of
any right of set-off, bankers' lien or counterclaim or similar right or
otherwise, and, as a result of such payment, such Bank shall have received a
greater percentage of the principal or interest then due hereunder by such
Obligor to such Bank than the
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percentage received by any other Banks, it shall promptly purchase from
such other Banks participations in (or, if and to the extent specified by such
Bank, direct interests in) the Loans of such type made by such other Banks (or
in interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that all
the Banks shall share the benefit of such excess payment (net of any expenses
which may be incurred by such Bank in obtaining or preserving such excess
payment) PRO RATA in accordance with the unpaid principal and/or interest on
the Loans of such type held by each of the Banks. If a U.S. Dollar Bank
acquires a participation in (or direct interest in) a Canadian Dollar Loan,
such U.S. Dollar Bank shall be a Canadian Dollar Bank to the extent of such
participation (or direct interest) and if a Canadian Dollar Bank acquires a
participation in (or direct interest in) a U.S. Dollar Loan, such Canadian
Dollar Bank shall be a U.S. Dollar Bank to the extent of such participation (or
direct interest). To such end all the Banks shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. The Obligors agree that
any Bank so purchasing a participation (or direct interest) in the Loans made
by other Banks (or in interest due thereon, as the case may be) may exercise
any and all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Bank were a direct
holder of Loans in the amount of such participation.
(c) Except as expressly set forth in the next succeeding sentence,
nothing in this Agreement shall require any Bank or the Issuing Bank to exercise
any such right or shall affect the right of any Bank or the Issuing Bank to
exercise, and retain the benefits of exercising, any such right with respect to
any other indebtedness or obligation of each and any Obligor. Each Bank that is
party to Bank Financial Accommodation Documents hereby agrees that, to the
extent that such Bank chooses to exercise any right of set-off, bankers' lien or
counterclaim (including the right
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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accorded to such Bank under this Section 4.07) with respect to obligations of
the Obligors under this Agreement or under such Bank's Bank Financial
Accommodation Documents, such Bank shall exercise such right first against, and
apply the benefits of such exercise first to, the Loans and Letter of Credit
Liabilities (or interests of such Bank therein) of the relevant Obligor
hereunder (and interests therein) and only after such application (and after
giving effect to the provisions of this Section 4.07) shall such Bank exercise
such right against, and apply the benefits of such exercise to, obligations of
such Obligor under such Bank's Bank Financial Accommodation Documents. If
under any applicable bankruptcy, insolvency or other similar law, any Bank or
the Issuing Bank receives a secured claim in lieu of a set-off to which this
Section 4.07 applies, such Bank shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Banks entitled under this Section 4.07 (or, in the case of a secured
claim received by the Issuing Bank, Section 2.01(II) hereof) to share in the
benefits of any recovery on such secured claim.
Section 5. YIELD PROTECTION; ILLEGALITY; FOREIGN TAXES.
5.01 ADDITIONAL COSTS. The following provisions shall apply to all
Banks, and, for the purposes of determining amounts payable or the circumstances
that would permit a Bank to request compensation or other action, the term
"Bank" shall be deemed to include any corporation controlling a Bank.
(a) The relevant Borrower shall pay to the relevant Agent for account
of each relevant Bank from time to time such amounts as such Bank may
determine to be necessary to compensate it for any costs which such Bank
determines are attributable to its making or maintaining of any Fixed Rate
Loans or its obligation to make any such Loan hereunder, or any reduction in
any amount receivable by such Bank hereunder in respect of any of such Loans
or such obligation
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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(such increases in costs and reductions in amounts receivable being herein
called "ADDITIONAL COSTS"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to such Bank
under this Agreement or its Notes in respect of any of such Loans (other than
taxes imposed on the overall net income or net worth of such Bank or of its
Applicable Lending Office for any of such Loans by the jurisdiction in which
such Bank has its principal office or such Applicable Lending Office); or
(ii) imposes, modifies or deems applicable any reserve, special
deposit, minimum capital, capital ratio or similar requirements (other than, in
the case of U.S. Dollar Banks, the Reserve Requirement utilized in the
determination of the Fixed Rate for such Eurodollar Loan or LIBO Rate for such
LIBOR Market Loan, as the case may be) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Bank
(including any of such Loans or any deposits referred to in the definition of
"Fixed Base Rate" in Section 1.01 hereof, or any Canadian Discount Rate Loan),
or any Revolving Credit Commitment of such Bank; or
(iii) imposes any other condition affecting this Agreement or its Notes
(or any of such extensions of credit or liabilities) or any Revolving Credit
Commitment of such Bank.
Each Bank will notify the relevant Borrower of any event occurring after the
date of this Agreement which will entitle such Bank to compensation for
Additional Costs pursuant to this Section 5.01(a) as promptly as practicable
after it obtains knowledge thereof and determines to request such compensation,
and will designate a different Applicable Lending Office for the Loans of such
Bank affected by such event if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole opinion of
such Bank, be disadvantageous to such Bank,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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provided that such Bank shall have no obligation to so designate an Applicable
Lending Office located in the United States. Each Bank will furnish the
relevant Borrower with a certificate setting forth the basis and amount of each
request by such Bank for compensation for Additional Costs under this Section
5.01(a). If any Bank requests compensation for Additional Costs from the
relevant Borrower under this Section 5.01(a), the Company may, by notice to
such Bank (with a copy to the relevant Agent), require that such Bank's Loans
of the type with respect to which such compensation is requested be Converted
into Base Rate Loans or Canadian Floating Rate Loans, as the case may be, in
accordance with Section 5.04 hereof.
(b) Without limiting the effect of the provisions of Section 5.01(a)
hereof, in the event that, by reason of any Regulatory Change, any Bank either
(i) incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such Bank
which includes, in the case of U.S. Dollar Banks, deposits by reference to which
the interest rate on Eurodollar Loans is determined or, in the case of Canadian
Dollar Banks, Bankers Acceptances by reference to which the interest rate on
Canadian Discount Rate Loans is determined, as provided in this Agreement or a
category of extensions of credit or other assets of such U.S. Dollar Bank which
includes Eurodollar Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then, if such
Bank so elects by notice to the relevant Borrower (with a copy to the relevant
Agent), the obligation of such Bank to make and to Continue, and to Convert
Loans into, Fixed Rate Loans hereunder shall be suspended until such Regulatory
Change ceases to be in effect (and all Eurodollar Loans of such type held by
such U.S. Dollar Bank shall be Converted into Base Rate Loans and all Canadian
Discount Rate Loans of such type held by such Canadian Dollar Bank shall be
Converted into Canadian Floating Rate Loans) in accordance with Section 5.04
hereof).
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the relevant Borrower shall pay directly
to each Bank and the Issuing Bank from time to time on request such amounts as
such Bank or the Issuing Bank may determine to be necessary to compensate such
Bank or the Issuing Bank for any costs which it determines are attributable to
the maintenance by such Bank (or any Applicable Lending Office) or the Issuing
Bank, pursuant to any law or regulation or any interpretation, directive or
request (whether or not having the force of law) of any court or governmental or
monetary authority (i) following any Regulatory Change or (ii) implementing any
risk-based capital guideline or requirement (whether or not having the force of
law and whether or not the failure to comply therewith would be unlawful)
hereafter issued by any government or governmental or supervisory authority
implementing at the national level the Basle Accord (including, without
limitation, the Final Risk-Based Capital Guidelines of the Board of Governors of
the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225,
Appendix A) and the Final Risk-Based Capital Guidelines of the Office of the
Comptroller of the Currency (12 CFR Part 3, Appendix A)), of capital in respect
of its Revolving Credit Commitment, Loans or Letters of Credit (or interests
therein) (such compensation to include, without limitation, an amount equal to
any reduction of the rate of return on assets or equity of such Bank (or any
Applicable Lending Office) or the Issuing Bank to a level below that which such
Bank (or any Applicable Lending Office) or the Issuing Bank could have achieved
but for such law, regulation, interpretation, directive or request).
(d) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), if as a result of any Regulatory Change
there shall be imposed, modified or deemed applicable any tax, reserve, special
deposit, minimum capital, capital ratio or similar requirement against or with
respect to or measured by reference to Letters of Credit issued or to be issued
hereunder (or interests therein) and the result shall be to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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increase the cost to any Bank or the Issuing Bank of issuing or maintaining
its obligation hereunder to issue or participate in any Letter of Credit or
reduce any amount receivable by any Bank or the Issuing Bank hereunder in
respect of any Letter of Credit (which increases in cost, or reduction in
amount receivable, shall be the result of such Bank's or the Issuing Bank's
reasonable allocation of the aggregate of such increases or reductions
resulting from such event), then, upon demand by such Bank or the Issuing
Bank, the Company shall pay directly to such Bank or the Issuing Bank, from
time to time as specified by such Bank or the Issuing Bank, such additional
amounts as shall be sufficient to compensate such Bank or the Issuing Bank
for such increased costs or reductions in amount.
(e) Determinations and allocations by any Bank or the Issuing Bank for
purposes of this Section 5.01 of the effect of any Regulatory Change
pursuant to Section 5.01(a), (b) or (d) hereof, or of the effect of capital
maintained pursuant to Section 5.01(c) hereof, on its costs or rate of
return of maintaining Loans or Letters of Credit (or interests therein) or
its obligation to make Loans or to issue Letters of Credit (or to acquire
interests therein), or on amounts receivable by it in respect of Loans, and
of the amounts required to compensate such Bank or the Issuing Bank under
this Section 5.01, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis.
5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Fixed Base Rate or
Canadian Discount Rate for any Interest Period:
(a) (i) with respect to U.S. Dollar Loans, the U.S. Agent determines
(which determination shall be conclusive) that quotations of interest rates
for the relevant deposits referred to in the definition of "Fixed Base Rate"
in Section 1.01 hereof are not being provided in the relevant amounts or for
the relevant maturities for purposes of
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determining rates of interest for Eurodollar Loans as provided herein;
or (ii) with respect to Canadian Dollar Loans, the Canadian Agent determines
(which determination shall be conclusive) that quotations of discount rates
for Bankers Acceptances referred to in the definition of "Canadian Discount
Rate" in Section 1.01 hereof are not being provided in the relevant amounts
or for the relevant maturities for purposes of determining rates of interest
for Canadian Discount Rate Loans as provided herein; or
(b) the Majority Banks (or any Bank that has outstanding a Money
Market Quote with respect to a LIBOR Market Loan) or the Canadian Dollar
Banks, as the case may be, determine (which determination shall be
conclusive) and notify (or notifies, as the case may be) the relevant Agent
that the relevant rates of interest referred to in the definition of "Fixed
Base Rate" or "Canadian Discount Rate" in Section 1.01 hereof upon the basis
of which the rate of interest for Eurodollar Loans or Canadian Discount Rate
Loans or LIBOR Market Loans, as the case may be, for such Interest Period is
to be determined are not likely adequately to cover the cost to such Banks
(or the such quoting Bank) of making or maintaining such Loans for such
Interest Period,
then the relevant Agent shall give the relevant Borrower and each Bank prompt
notice thereof, and so long as such condition remains in effect, the U.S.
Dollar Banks (or such quoting Bank) shall be under no obligation to make
additional Fixed Rate Loans, to Continue Fixed Rate Loans, or to Convert Base
Rate Loans into Eurodollar Loans or Canadian Floating Rate Loans into Canadian
Discount Rate Loans, as the case may be, and the relevant Borrower shall, on
the last day(s) of the then current Interest Period(s) for the outstanding
Fixed Rate Loans, either prepay such Loans or Convert such Loans into Base Rate
Loans or Canadian Floating Rate Loans, as the case may be, in accordance with
Section 2.08 hereof.
5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any
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U.S. Dollar Bank or its Applicable Lending Office to honor its obligation to
make or maintain Fixed Rate Loans or LIBOR Market Loans hereunder, then such
U.S. Dollar Bank shall promptly notify the relevant Borrower thereof (with a
copy to the relevant Agent) and such U.S. Dollar Bank's obligation to make or
Continue Fixed Rate Loans, or Convert, as the case may be, Base Rate Loans into
Eurodollar Loans or Canadian Floating Rate Loans into Canadian Discount Rate
Loans, shall be suspended until such time as such Bank may again make and
maintain Fixed Rate Loans and such Bank's outstanding Fixed Rate Loans shall be
Converted into Base Rate Loans or Canadian Floating Rate Loans, as the case may
be, in accordance with Section 5.04 hereof, and such Bank shall no longer be
obligated to make any LIBOR Market Loan that it has offered to make.
5.04 CERTAIN CONVERSIONS PURSUANT TO SECTIONS 5.01 AND 5.03. If the
Eurodollar Loans of any U.S. Dollar Bank or the Canadian Discount Rate Loans of
any Canadian Dollar Bank (Loans of such type being herein called "AFFECTED
LOANS" and such type being herein called the "AFFECTED TYPE") are to be
Converted pursuant to Section 5.01 or 5.03 hereof, such Bank's Affected Loans
shall be automatically Converted into Base Rate Loans (in the case of U.S.
Dollar Banks) or Canadian Floating Rate Loans (in the case of Canadian Dollar
Banks) on the last day(s) of the then current Interest Period(s) for the
Affected Loans (or, in the case of a Conversion required by Section 5.01(b) or
5.03 hereof, on such earlier date as such Bank may specify to the Company with a
copy to the relevant Agent) and, unless and until such Bank gives notice as
provided below that the circumstances specified in Section 5.01 or 5.03 hereof
which gave rise to such Conversion no longer exist:
(a) to the extent that such Bank's Affected Loans have been so
Converted, all payments and prepayments of principal which would otherwise
be applied to such Bank's Affected Loans shall be applied instead to its
Base Rate Loans or Canadian Floating Rate Loans, as the case may be; and
(b) all Loans which would otherwise be made or Continued by such Bank
as Loans of the Affected Type shall
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be made or Continued instead as Base Rate Loans or Canadian Floating Rate
Loans, as the case may be, and all Loans of such Bank which would otherwise
be Converted into Loans of the Affected Type shall be Converted instead into
(or shall remain as) Base Rate Loans or Canadian Floating Rate Loans, as the
case may be.
If such Bank gives notice to the relevant Borrower (with a copy to the relevant
Agent) that the circumstances specified in Section 5.01 or 5.03 hereof which
gave rise to the Conversion or non-Continuation of such Bank's Affected Loans
pursuant to this Section 5.04 no longer exist (which such Bank agrees to do
promptly upon such circumstances ceasing to exist) at a time when Loans of the
Affected Type are outstanding, such Bank's Base Rate Loans or Canadian Floating
Rate Loans, as the case may be, shall be automatically Converted, on the first
day(s) of the next succeeding Interest Period(s) for such outstanding Loans of
the Affected Type, to the extent necessary so that, after giving effect
thereto, all Loans held by the Banks holding Loans of the Affected Type and by
such Bank are held PRO RATA (as to principal amounts, types and Interest
Periods) in accordance with their respective Revolving Credit Commitments.
5.05 COMPENSATION. The relevant Borrower shall pay to the
relevant Agent for account of each Bank, upon the request of such Bank through
such Agent, such amount or amounts as shall be sufficient (in the reasonable
opinion of such Bank) to compensate such Bank (or any corporation controlling
such Bank) for any loss, cost or expense which such Bank determines are
attributable to:
(a) any payment (subject to clause (ii) of the last sentence of
Section 3.03(c) hereof to the extent applicable), prepayment or Conversion
of a Eurodollar Loan or Money Market Loan made by such U.S. Dollar Bank or a
Canadian Discount Rate Loan made by such Canadian Dollar Bank for any reason
(including, without limitation, the acceleration of the Loans pursuant to
Section 10 hereof) on a date other than the last day of an Interest Period
for such Loan; or
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(b) any failure by the relevant Borrower for any reason (including,
without limitation, the failure of any of the conditions precedent specified
in Section 7 hereof to be satisfied but excluding any such failure by the
relevant Borrower caused solely by operation of Section 5.03 hereof) to
borrow a Eurodollar Loan or a Money Market Loan (with respect to which, in
the case of a Money Market Loan, the Company has accepted a Money Market
Quote) from such U.S. Dollar Bank or a Canadian Discount Rate Loan from such
Canadian Dollar Bank on the date for such borrowing specified in the
relevant notice of borrowing given pursuant to Section 4.05 or Section
2.01(III)(b) hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
(excluding Applicable Margin if the event described in clause (a) or (b)
requiring such compensation did not relate to an outstanding Fixed Rate Loan)
which otherwise would have accrued on the principal amount so paid, prepaid or
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein OVER (ii) (A) with respect to any such Eurodollar Loan, the interest
component of the amount such U.S. Dollar Bank (or any corporation controlling
such U.S. Dollar Bank) would have bid in the London interbank market for U.S.
Dollar deposits of leading banks in amounts comparable to such principal amount
and with maturities comparable to such period (as reasonably determined by such
U.S. Dollar Bank) or (B) with respect to any such Canadian Discount Rate Loan,
the discount rate on Bankers Acceptances having an aggregate face amount of
CAN$1,000,000 and with maturities comparable to such period that such Canadian
Dollar Bank (or any corporation controlling such Canadian Dollar Bank) would
have purchased in the normal course of its business (as reasonably determined
by such Canadian Dollar Bank).
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5.06 TAXES.
(a) TAX PAYMENTS. Each relevant Obligor (which shall mean for
purposes of this Section 5.06 in the case of Taxes imposed by the United States
or any state or political subdivision thereof, the Company; in the case of Taxes
imposed by Canada or any province or political subdivision thereof, PSC; in the
case of Taxes imposed by Mexico or any state or political subdivision thereof,
PSM; and, in the case of Taxes imposed by the country in which it is organized
or any state or political subdivision thereof, any other Guarantor) will pay
when due, for its own account, all present and future income, stamp, recording,
documentary and other taxes and levies, imposts, deductions, charges, compulsory
loans and withholdings whatsoever imposed, assessed, levied or collected by any
jurisdiction, together with interest thereon and penalties with respect thereto,
if any, on or in respect of this Agreement (including, without limitation, in
respect of payments under Section 6 hereof), any Loan, any Letter of Credit (or
interest therein), any Security Document, any Letter of Credit Document or any
Note, the registration, recording, notarization or other formalization of any
thereof, and any payments of principal, interest, charges, fees or other amounts
made on, under or in respect of any thereof including the enforcement thereof
(excluding taxes imposed on the overall net income or overall net worth of the
Issuing Bank or any Bank or its Applicable Lending Office(s) by the jurisdiction
in which the Issuing Bank or such Bank has its principal office or such
Applicable Lending Office(s)) (hereinafter called "TAXES").
(b) INDEMNIFICATION. Each relevant Obligor will indemnify any Bank
and the Issuing Bank against, and reimburse any Bank and the Issuing Bank upon
demand through the relevant Agent for, any Taxes and any loss, liability, claim
or expense, including interest, penalties, fines, surcharges and legal fees,
which such Bank or the Issuing Bank may incur at any time arising out of or in
connection
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with any failure of such Obligor to make any payment of Taxes when due.
(c) PAYMENTS FREE AND CLEAR. All payments on account of the principal
of and interest on the Loans and the Notes and all other amounts payable by any
Obligor to any Bank or the Issuing Bank hereunder or under any Security Document
or any Letter of Credit Document (including, without limitation, amounts payable
under clause (b) hereof) shall be made free and clear of and without reduction
by reason of any Taxes, all of which will be for the account of and paid in full
when due by such Obligor. In the event that any Obligor is required by
applicable law, decree or regulation to deduct or withhold Taxes from any
amounts payable on, under or in respect of this Agreement, the Loans, any Letter
of Credit (or interest therein), any Security Document, any Letter of Credit
Document or any Notes, such Obligor shall make the required deduction or
withholding, promptly pay the amount of such Taxes to the appropriate taxing
authorities and pay to the relevant Agent such additional amounts as may be
required, after the deduction or withholding of Taxes, to enable each Bank and
the Issuing Bank to receive from such Obligor, on the due date thereof, an
amount equal to the full amount stated to be payable to such Bank and the
Issuing Bank under this Agreement, any Security Document, any Letter of Credit
Document or any Note payable to the order of such Bank or the Issuing Bank.
(d) EVIDENCE OF TAX PAYMENTS. Without in any way affecting any
Obligor's obligations under the preceding provisions of this Section 5.06, such
Obligor agrees to furnish to each Agent (together with a copy for each Bank) the
originals or certified copies of all tax receipts in respect of each payment,
deduction or withholding of Taxes required to be made by applicable laws or
regulations, within 45 days after the date each payment under or in respect of
this Agreement, any Security Document, any Letter of Credit Document or any Note
subject to Taxes is made, and such Obligor shall, at the request of any Bank or
the Issuing Bank, promptly furnish to such Bank or the Issuing Bank any other
information, documents and receipts that such Bank or the Issuing
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Bank may reasonably require (and that such Obligor can obtain with reasonable
efforts) to establish to its satisfaction that full and timely payment has been
made of all Taxes required to be paid hereunder.
(e) SURVIVAL. The covenants and agreements of each Obligor under this
Section 5.06 shall survive the repayment of the Loans, the termination or
expiration of the Revolving Credit Commitments and the cancellation of the
Notes.
Section 6. GUARANTEES.
6.01 UNCONDITIONAL GUARANTEES.
(a) GUARANTEES. For valuable consideration, receipt whereof is hereby
acknowledged, and to induce the Banks to enter into this Agreement, each
Guarantor (subject, in the case of PSC and PSM, to the provisions of clause (b)
below) hereby unconditionally guarantees to each Bank, each Agent and the
Issuing Bank that its Guaranteed Obligations shall be promptly paid in full when
due (whether at stated maturity, by acceleration or otherwise) in accordance
with the terms hereof and thereof, and, in the case of any extension of time of
payment, in whole or in part, that all such amounts shall be promptly paid when
due (whether at stated maturity, by acceleration or otherwise) in accordance
with the terms of such extension. In addition, any Guarantor (subject, in the
case of PSC or PSM, to the provisions of clause (b) below) hereby
unconditionally agrees that upon default in the payment when due (whether at
stated maturity, by acceleration or otherwise) of any of such Guaranteed
Obligations, such Guarantor shall forthwith pay the same.
(b) CONTINGENT NATURE OF OBLIGATIONS OF PSM AND PSC. Anything in the
foregoing Section 6.01(a) to the contrary notwithstanding, the following
provisions shall apply to PSM and PSC (but to no other Guarantor):
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Unless and until a Contingent Event shall occur and be continuing and
the Majority Banks (through the U.S. Agent) shall notify PSC and/or PSM
(through the Company) in writing of the same, PSC and PSM shall have no
obligation whatsoever under Section 6.01(a) hereof with respect to its
Guaranteed Obligations. In the event that a Contingent Event shall have
occurred and be continuing, from and after (but not before) the date of the
notice referred to in the preceding sentence, PSC and/or PSM (as specified
in such notice) shall automatically be and become a Guarantor for all
purposes under Section 6.01(a) hereof with respect to its Guaranteed
Obligations.
6.02 VALIDITY. The obligations of each Guarantor under this Section 6
(subject in the case of PSC and PSM to the provisions of Section 6.01(b) hereof)
shall be unconditional irrespective of the value, genuineness, legality,
validity, regularity or enforceability of the obligations of any other Obligor
under this Agreement, the Notes, any of the Security Documents, any of the
Letter of Credit Documents, any of the Bank Financial Accommodation Documents
or, to the fullest extent permitted by applicable law, any other circumstance
whatsoever which might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor. Without limiting the generality of the
foregoing, each Guarantor agrees that its obligations hereunder shall not be
affected by any time, by any amendment, modification or supplement to, or waiver
of any provision of, any Document or by any other indulgence granted to any
Obligor. Accordingly, PSM hereby irrevocably and expressly waives its rights
under and the benefits of Articles 2846 and 2847 of the Civil Code for the
Federal District of Mexico, and the corresponding articles of the other states
of Mexico, which Articles and corresponding articles are not reproduced herein
by express declaration that the contents of such articles are known to PSM.
6.03 WAIVERS. Each Guarantor hereby expressly waives diligence,
presentment and protest and any requirement that any right or power be
exhausted or any action be taken against any
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other Obligor or any other Person and all notices and demands whatsoever. For
purposes of the aforesaid waiver by PSM of any requirement that any right be
exhausted or any action be taken against any other Obligor or any other Person
prior to action by either Agent or any Bank or the Issuing Bank against PSM, PSM
also hereby irrevocably expressly waives (i) the benefits of "orden y excusion"
and of prior judgment, levy, execution and other rights provided for in Articles
2814, 2815, 2817, 2818, 2820, 2821, 2823, 2836, 2839 and 2840 of the Civil Code
for the Federal District of Mexico, and the corresponding articles of the other
states of Mexico and (ii) any requirement of judicial demand for payment,
whether under Article 2848 or 2849 of the Civil Code for the Federal District of
Mexico or otherwise which Articles and corresponding articles are not reproduced
herein by express declaration that the contents of said articles are known to
PSM.
6.04 SUBROGATION. Each Guarantor hereby waives, to the fullest extent
permitted by applicable law, all rights of subrogation or contribution, whether
arising by contract or operation of law (including, without limitation, any such
right arising under the Federal Bankruptcy Code) or otherwise by reason of any
payment by it pursuant to the provisions of this Section 6 and further agrees
with each other Obligor for the benefit of each of such Obligor's creditors
(including, without limitation, each Bank, the Issuing Bank and either Agent)
that any such payment by it shall constitute a contribution of capital by such
Guarantor to such Obligor to the extent it relates to a Guaranteed Obligation of
such Obligor.
6.05 ACCELERATION. Each Guarantor agrees that, as between it and the
other Guarantors on the one hand, and any Bank, the Issuing Bank and either
Agent, on the other hand, to the fullest extent permitted by applicable law, the
obligations of either Borrower (other than itself) guaranteed under this Section
6 may be declared to be forthwith due and payable, or may be deemed
automatically to have been accelerated, as provided in Section 10 hereof for
purposes of this Section 6 notwithstanding any stay, injunction or other
prohibition (whether in a bankruptcy proceeding (including, without limitation,
in the case
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of PSC, any application under the Companies' Creditors Arrangement Act, as
amended from time to time, or the Bankruptcy and Insolvency Act (Canada) or,
with respect to reorganization or relief of debts, under the Business
Corporations Act (Ontario), as amended from time to time) affecting such
Borrower or otherwise) preventing such declaration as against such Borrower and
that, in the event of such declaration or automatic acceleration, such
obligations (whether or not due and payable by such Borrower) shall forthwith
become due and payable by each Guarantor for purposes of this Section 6 (subject
to, in the case of PSC and PSM, the provisions of Section 6.01(b) hereof).
6.06 REINSTATEMENT. Each Guarantor's obligations under this Section 6
shall be reinstated if at any time any payment received by any Bank, the Issuing
Bank or either Agent from either Borrower hereunder or under any Note is
rescinded or required to be repaid by such Bank, the Issuing Bank or such Agent.
6.07 JOINT AND SEVERAL OBLIGATIONS, ETC. It is expressly understood
and agreed that the obligations of each Guarantor under this Section 6 shall be
joint and several and shall not be affected, modified or impaired by the
compromise, settlement, waiver, change, modification, amendment (whether
material or otherwise) or termination of any or all of the obligations, duties,
covenants or agreements by any other Guarantor under this Section 6 or by the
taking of, or the failure to take, or any delay on the part of either Agent, the
Issuing Bank or any Bank in taking any action against any such other Guarantor
to enforce, assert or exercise any right, power or remedy conferred on either
Agent, the Issuing Bank or any Bank hereunder or in connection with any of the
transactions contemplated hereby. Each Guarantor hereby acknowledges the
provisions of Section 6.01(b) hereof.
6.08 SEVERABILITY. With respect to any Guarantor, the provisions of
this Section 6 are severable, and in any action or proceeding involving any
corporate law applicable to such Guarantor, or any bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally
applicable to
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such Guarantor or its obligations under this Section 6, if the obligations of
such Guarantor under this Section 6 would otherwise be held or determined to be
void, invalid or unenforceable on account of the amount of its liability under
this Section 6, then, notwithstanding any other provision of this Agreement
(including, without limitation, this Section 6) to the contrary, the amount of
such liability shall, without any further action by such Guarantor, any of the
Banks, the Issuing Bank, either Agent or any other Person, be automatically
limited and reduced to the highest amount which is valid and enforceable as
determined in such action or proceeding.
Section 7. CONDITIONS PRECEDENT.
7.01 AMENDMENT EFFECTIVE DATE. The effectiveness of the amendment and
restatement of the Original Credit Agreement provided for hereby is subject to
the condition precedent that the Agents shall have received the following, each
of which shall be in form and substance satisfactory to each Agent:
(a) PRINCIPAL DOCUMENTS.
(i) NOTES. The Money Market Notes, duly executed and completed by the
Company dated the Restatement Date.
(ii) [Intentionally omitted]
(III) MORTGAGES AND TITLE SEARCHES. Amendments to each of the
Mortgages substantially in the form of Exhibit B-6 hereto, duly executed and
delivered by the Company in recordable form (in such number of copies as the
U.S. Agent shall have requested), together with title searches with respect
to the land and improvements covered by each of the Mortgages by one or more
title companies satisfactory to the U.S. Agent (the "TITLE COMPANIES"). The
Company shall have paid to the Title Companies all expenses of the Title
Companies in connection with such title searches and in addition shall have
paid to the Title Companies an amount equal to any recording, stamp or
similar taxes payable in
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connection with recording each Amendment to Mortgage referred to in
this clause (iii) in the appropriate county land office.
(b) [Intentionally omitted]
(c) [Intentionally omitted]
(d) [Intentionally omitted]
(e) [Intentionally omitted]
(f) OPINIONS OF COUNSEL.
(i) [Intentionally omitted]
(ii) COUNSEL TO PSC. An opinion of Miller Thomson, Canadian counsel
to PSC, dated the Restatement Date, substantially in the form of Exhibit I-6
hereto.
(iii) GENERAL COUNSEL OF THE COMPANY. AN opinion of Ronald C. Eksten,
Esq., general counsel of the Company, dated the Restatement Date,
substantially in the form of Exhibit I-9 hereto.
(iv) [Intentionally omitted]
(v) [Intentionally omitted]
(vi) SPECIAL NEW YORK COUNSEL TO THE BANKS AND THE AGENTS. An Opinion
of Milbank, Tweed, Hadley & McCloy, special New York counsel to the Banks and
the Agents, dated the Restatement Date, substantially in the form of Exhibit
K hereto.
(g) FEES. The Borrowers shall have paid to the U.S. Agent for the
account of each of the Banks letter of credit fees under Section 2.01.II(a)(4)
of the Original Credit Agreement, and the commitment fees under Section 2.04(a)
of
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the Original Credit Agreement, in each case accrued to the Amendment
Effective Date and unpaid.
(h) [Intentionally omitted]
(i) [Intentionally omitted]
(j) [Intentionally omitted]
(k) OTHER DOCUMENTS. Such other documents as either Agent or
the Majority Banks or special New York counsel to the Banks or special
Canadian counsel to the Banks may reasonably request.
7.02 [Intentionally omitted]
7.03 INITIAL AND ALL SUBSEQUENT EXTENSIONS OF CREDIT. The
obligation of the U.S. Dollar Banks to make the Loans to be made upon the
occasion of each borrowing hereunder (including, without limitation, borrowings
on the Amendment Effective Date and borrowings of Canadian Dollar Loans), and
the obligation of the Issuing Bank to issue Letters of Credit (including,
without limitation, issuances on the Amendment Effective Date), is subject to
the further conditions precedent that, as of the date of such Loans or such
issuance of Letters of Credit, and after giving effect thereto (a) no Default
shall have occurred and be continuing; and (b) the representations and
warranties made (i) by the Obligors in Section 8 hereof and in each Security
Document, (ii) by Holdings in any Holdings Document and (iii) by each Majority
Interest Party in each Majority Interest Document, shall be true and correct on
and as of the date of such borrowing or issuance with the same force and effect
as if made on and as of such date. In the case of borrowings of Loans or
issuances of Letters of Credit (other than the borrowings or issuances on the
Amendment Effective Date), the related notice of borrowing or issuance by
either Borrower hereunder shall constitute a certification by each such
Borrower to the effect set forth in the preceding sentence (both as of the date
of such notice and, unless such Borrower otherwise notifies the Agents, as of
the date of such borrowing or issuance).
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Section 8. REPRESENTATIONS AND WARRANTIES. Each Obligor represents
and warrants to the Agents and the Banks (in the case of each Obligor (other
than the Company) in its capacity as a Subsidiary of the Company and in its
independent corporate capacity) that:
8.01 CORPORATE AND LEGAL EXISTENCE AND STRUCTURE.
The Company and each of the Subsidiaries:
(i) is a corporation duly organized and validly existing under
the laws of the jurisdiction of its organization;
(ii) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business (other than those material
governmental licenses, authorizations, consents and approvals the
failure so to have would not have a material adverse effect on the
prospects, business, financial condition or operations of the Company
and the Subsidiaries taken as a whole); and
(iii) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a material adverse
effect on its prospects, business, operations or financial condition.
8.02 INFORMATION
(a) All material information heretofore furnished by each Obligor
(or its predecessors) or on its behalf to either Agent or any Bank for
purposes of or in connection with this Agreement or any other Documents or
any transaction contemplated hereby or thereby is, and all such
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information furnished by it to either Agent or any Bank will be, true and
accurate in all material respects on the date as of which such information is
stated or certified. Each Obligor has disclosed to the Banks in writing any and
all facts which materially and adversely affect or may affect (to the extent it
can now reasonably foresee) the prospects, business, operations or financial
condition of it and its Subsidiaries, in each case taken as a whole.
(b) Without limiting the generality of paragraph (a):
(i) [Intentionally omitted]
(ii) The consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1993 and the related consolidated statement of
income, retained earnings and changes in cash flows of the Company and its
Subsidiaries for the fiscal year ended on December 31, 1993, with the opinion
thereon of Arthur Andersen & Co., heretofore furnished to each of the Banks,
present fairly, in all material respects, the consolidated financial condition
of the Company and its Subsidiaries as at said date and the consolidated
results of their operations for the period covered thereby, all in accordance
with GAAP applied on a consistent basis. Neither the Company nor any of its
Subsidiaries had on said date any material contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in said balance sheet as at said date (or the notes
thereto);
(iii) [Intentionally omitted]
(iv) The balance sheet of PSC as at December 31, 1993 and the related
statement of income, retained earnings and changes in cash flows of PSC for the
fiscal year ended on December 31, 1993, with the opinion thereon of Arthur
Andersen & Co., heretofore furnished to each of the Banks, present fairly, in
all material respects, the financial
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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condition of PSC as at said date and the results of its
operation for the period covered thereby, all in accordance with
generally accepted accounting principles in Canada applied on a
consistent basis. PSC did not have on said date any material
contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or
provided for in said balance sheet as at said date (or the notes
thereto); and
(v) Since December 31, 1993, there has been no material
adverse change in the prospects, business, operations or financial
condition of the Company and the Subsidiaries taken as a whole from
that set forth in the financial information set forth in the financial
statements referred to in clause (ii) above.
8.03 LITIGATION. Except as disclosed on Schedule VI hereto, there are
no legal or arbitral proceedings or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the best
knowledge of any Responsible Officer of any Obligor) threatened against any
Obligor or any of its Subsidiaries as to which there is a reasonable
possibility of an adverse determination that could have a material adverse
effect on the prospects, business, operations or financial condition of any
Obligor and its Subsidiaries taken as a whole, or on the timely payment of the
principal of or interest on the Loans or the Letter of Credit Obligations or on
the enforceability of this Agreement, the Notes or the Security Documents or on
the rights and remedies of the Agents, the Issuing Bank or the Banks hereunder
or thereunder.
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8.04 NO BREACH.
(a) None of the execution and delivery of this Agreement, the Notes,
the Security Documents, the Reorganization Documents to which it is a
party or any of the other Documents, or the consummation of the
transactions herein and therein contemplated or performance or
compliance with the terms and provisions hereof or thereof will
conflict with or result in a breach of or default under, or require any
consent under or result in the creation or imposition of any Lien upon
any of the properties, assets or revenues of any Obligor or any of
its Subsidiaries pursuant to the terms of:
(i) the Certificate of Incorporation or By-laws (or equivalent) of
the Company or any other Obligor;
(ii) any applicable law or regulation;
(iii) any order, writ, injunction or decree of any court or
governmental authority or agency; or
(iv) except as set forth on Schedule XI hereto, any agreement or
instrument to which any Obligor or any of its Subsidiaries is a party
or by which it is bound.
(b) [Intentionally omitted]
8.05 CORPORATE ACTION. Each of the Obligors has all necessary
corporate authority to execute, deliver and perform its obligations under this
Agreement, the Notes (in the case of the Borrowers) and the Security Documents
to which such Obligor is a party (if any) and each of the other Documents
executed or to be executed by it; the execution, delivery and performance by
each of the Obligors of this Agreement, the Notes (in the case of the
Borrowers) and the Security Documents to which such Obligor is a party (if any)
and each of the other Documents executed by it have been duly authorized by all
necessary corporate action on its part; and this Agreement and each of the
Security Documents have been duly and validly executed and delivered by each of
the
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Obligors party thereto and constitutes, and each of the Notes when executed and
delivered by the Borrower that is the maker thereof for value and each of the
other Documents when executed and delivered by the Obligor party thereto will
constitute, its legal, valid and binding obligation, enforceable in accordance
with its terms.
8.06 USE OF PROCEEDS. The Company shall use the proceeds of the
Series A R/C Loans to prepay in full the principal of, interest on and all
other amounts owed with respect to the Refinanced Indebtedness of the Company,
to provide working capital and fulfill other lawful corporate purposes and to
pay the Holdings Dividend permitted by Section 9.12 hereof. PSC shall use the
proceeds of the Series B R/C Loans to provide working capital and fulfill other
lawful corporate purposes. Letters of Credit shall be issued for the account
of the Company solely for the purposes described in Section 2.01(II)(a)(3)
hereof.
8.07 APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by any Obligor
of this Agreement, each Security Document to which it is a party or (in the
case of the Borrowers), the Notes (in the case of the Borrowers) or for the
validity or enforceability thereof.
8.08 ERISA. The Company and the ERISA Affiliates have fulfilled their
respective obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the presently applicable provisions of ERISA and the Code (except as to
matters where non-compliance would not materially adversely affect the
prospects, business, operations or financial condition of the Company and the
Subsidiaries taken as a whole), and have not incurred any material liability to
the PBGC or any Plan or Multiemployer Plan (other than the ongoing
responsibility to make contributions or premium payments which are not
currently past due).
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8.09 TAXES. Each Obligor has filed all United States Federal, and Canadian
federal and provincial, income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes shown to be due
pursuant to such returns or pursuant to any assessment received by any Obligor
or any of its Subsidiaries. The charges, accruals and reserves on the books of
each Obligor and each of its Subsidiaries in respect of taxes and other
governmental charges are, in the opinions of such Obligor, adequate.
8.10 CERTAIN AGREEMENTS. Set forth in Part A of Schedule III hereto is a
complete and correct list, as of the Amendment Effective Date, of the
Refinanced Indebtedness and each credit agreement, loan agreement, indenture,
purchase agreement, guarantee or other arrangement providing for or otherwise
relating to any extension of credit to, or guarantee by, the Company or any
Subsidiary (other than as the same relates to trade credit) which has an
aggregate outstanding principal or face amount in excess of U.S.$500,000 (or a
U.S. Dollar Equivalent) and the aggregate principal or face amount outstanding
or which may become outstanding under each such arrangement is correctly
described in said Part A of Schedule III. Set forth in Part B of Schedule III
hereto is a complete and correct summary, as of the Amendment Effective Date,
of the terms and conditions of each Interest Rate Protection Arrangement
entered into by the Company or any of its Subsidiaries (including, without
limitation, a copy of each confirmation relating to each Interest Rate
Protection Arrangement).
8.11 SUBSIDIARIES, ETC. Schedule II hereto contains a complete and
accurate list, as of the Amendment Effective Date, of all Subsidiaries of the
Obligors. Except as disclosed in Schedule II hereto, each Obligor owns free
and clear of all Liens (other than pursuant to the Security Documents), all of
the capital stock of the Subsidiaries set forth beneath the name of such
Obligor in said Schedule II, and all of such capital stock is validly issued,
fully paid and non-assessable. Each of the Subsidiaries is a consolidated
Subsidiary of the Company for financial reporting purposes.
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8.12 LEGAL FORM. In the case of PSC and PSM, this Agreement, and, in the
case of PSC, the Security Documents to which it is a party and each of its
Notes are in proper legal form (i) in the case of PSM, under the laws of Mexico
for enforcement thereof against PSM in Mexico (provided that an official
translation of this Agreement into Spanish by a translator authorized by the
Mexican courts would have to be prepared in order to initiate any proceeding
for the enforcement thereof in the courts of Mexico) and (ii) in the case of
PSC, under the laws of Canada and the applicable province thereof for
enforcement thereof against PSC in Canada.
8.13 ASSETS.
(a) Each Obligor owns and has good title to (or, if subject to lease,
leasehold interests in) its properties and assets, free and clear of all
Liens or other encumbrances of any nature other than Liens expressly
permitted by Section 9.14 hereof.
(b) Each Obligor owns, free and clear of all Liens (except Liens in favor
of either Agent for the benefit of the Banks), all of the patents,
trademarks, trade names, copyrights or rights with respect to the foregoing,
and has obtained assignments of all leases and other rights of whatever
nature, deemed by such Obligor to be necessary for the present and planned
future conduct of its business, without any conflict with the rights of
others which might result in a material adverse effect on the prospects,
business, operations or financial condition of the Company and the
Subsidiaries taken as a whole. Each Obligor has received all assignments,
bills of sale or other documents necessary to establish, protect and perfect
such Obligor's right, title and interest in and to all of the property
described in the foregoing sentence. Each Obligor has duly effected all
filings, recordings and other actions necessary to establish, protect and
perfect such Obligor's right, title and interest in and to all of the
material property described in the second preceding sentence.
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8.14 MARGIN STOCK. The extensions of credit to the Borrowers hereunder
will not contravene the provisions of Regulation G, Regulation T, Regulation U
or Regulation X. Not more than 25% of the value (as determined by any
reasonable method) of the assets of the Company and its Subsidiaries is
represented by "margin stock" within the meaning of Regulation U.
8.15 PUBLIC UTILITY HOLDING COMPANY ACT; INVESTMENT COMPANY ACT. Neither
the Company nor any of the Subsidiaries is (i) a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended from time to time or (ii) an "investment company" within the meaning
of the Investment Company Act of 1940, as amended from time to time.
8.16 HAZARDOUS MATERIALS. The Company and each of the Subsidiaries have
obtained all permits, licenses and other authorizations which are required
under all Environmental Laws, except to the extent failure to have any such
permit, license or authorization would not have a material adverse effect on
the financial condition, operations, business or prospects of the Company and
the Subsidiaries taken as a whole. Except as set forth on Schedule X hereto,
the Company and each of the Subsidiaries are in compliance with the terms and
conditions of all such permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
would not have a material adverse effect on the financial condition,
operations, business or prospects of the Company and the Subsidiaries taken as
a whole.
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In addition, except as set forth in Schedule X hereto:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or, to the
best knowledge of the Company, threatened by any governmental entity with
respect to any alleged failure by the Company or any of the Subsidiaries to
have any permit, license or authorization required in connection with the
conduct of the business of the Company or any of the Subsidiaries or with
respect to any generation, treatment, storage, recycling, transportation,
release or disposal, or any release as defined in 42 U.S.C. Section 9601(22)
or any foreign Environmental Law of general application ("RELEASE"), of any
substance regulated under Environmental Laws ("HAZARDOUS MATERIALS") generated
by the Company or any of the Subsidiaries.
(b) Neither the Company nor any of the Subsidiaries has handled any
Hazardous Waste (as defined in 40 CFR Section 261) or any Subject Waste (as
defined in Regulation 347 under the Environmental Protection Act (Ontario)
except as allowed by permit or regulation on any property now or previously
owned or leased by the Company or any of the Subsidiaries to an extent that it
has, or may reasonably be expected to have, a material adverse effect on the
financial condition, operations, business or prospects of the Company and the
Subsidiaries taken as a whole; and
(i) no polychlorinated biphenyls are, or have been, present at any
property now or previously owned or leased by the Company or any of the
Subsidiaries;
(ii) no asbestos is, or has been, present at any property now or
previously owned or leased by the Company or any of the Subsidiaries;
(iii) there are no underground storage tanks for Hazardous Materials,
active or abandoned, at any
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property now or previously owned or leased by the Company or any of the
Subsidiaries;
(iv) no Hazardous Materials have been Released, in a reportable
quantity, where such a quantity has been established by a statute,
ordinance, rule, regulation or order, at, on or under any property now
or previously owned or leased by the Company or any of the Subsidiaries;
and
(v) no Hazardous Materials have been otherwise Released at, on or
under any property now or previously owned or leased by the Company or any
of the Subsidiaries;
in the case of each of the circumstances described in clauses (i) through (v)
inclusive above, to an extent that such circumstance has, or may reasonably be
expected to have, a material adverse effect on the financial condition,
operations, business or prospects of the Company and the Subsidiaries taken as
a whole.
(c) To the best knowledge of the Company, after due inquiry, neither
the Company nor any of the Subsidiaries has transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for
possible inclusion on the National Priorities List by the Environmental
Protection Agency, on the Comprehensive Environmental Response Compensation and
Liability and Information System ("CERCLIS") or on any similar state or foreign
list or which is the subject of federal, state, provincial or local enforcement
actions or other investigations which may reasonably
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be expected to lead to claims against the Company or any of the Subsidiaries
for clean-up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under CERCLA,
to an extent that such circumstance has, or may reasonably be expected to
have, a material adverse effect on the financial condition, operations,
business or prospects of the Company and the Subsidiaries taken as a whole.
(d) To the best knowledge of the Company, after due inquiry, no Hazardous
Material generated by the Company or any of the Subsidiaries has been
recycled, treated, stored, disposed of or Released by the Company or any of
the Subsidiaries at any location other than those listed on Schedule X
hereto.
(e) No oral or written notification of a Release of a Hazardous Material
has been filed by or on behalf of the Company or any of the Subsidiaries and
no property now or previously owned or leased by the Company or any of the
Subsidiaries is listed or proposed for listing on the National Priority list
promulgated pursuant to CERCLA, on CERCLIS or on any similar state or foreign
list of sites requiring investigation or clean-up.
(f) There are no Liens arising under or pursuant to any Environmental Laws
on any of the real property or properties owned or leased by the Company or
any of the Subsidiaries, and no government actions have been taken or are in
process which could subject any of such properties to such Liens and neither
the Company nor any of the Subsidiaries would be required to place any notice
or restriction relating to the presence of Hazardous Materials at any
property owned by it in any deed to such property.
(g) To the best knowledge of the Company, after due inquiry, there have
been no environmental investigations, studies, audits, tests, reviews or
other analyses conducted by or which are in the possession of the Company or
any of the Subsidiaries in relation to any property or facility now or
previously owned or leased by the Company or any of the Subsidiaries which
have not been superseded and which have not been made available to the Banks
upon request (subject to Section 12.15 hereof).
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8.17 PRODUCT RECALL LIABILITY. Set forth on Schedule VIII hereto is a
complete and correct list, as of the Amendment Effective Date of all active
Product Recall Events of the Company and the Subsidiaries and the Product
Recall Liability relating thereto. Aggregate Product Recall Liability with
respect to all Product Recall Events of the Company and the Subsidiaries will
not result in a material adverse change in the prospects, business, operations
or financial condition of the Company and the Subsidiaries taken as a whole,
and no significant possibility of aggregate Product Recall Liability resulting
in such a material adverse change exists based upon then current conditions and
circumstances.
Section 9. COVENANTS. So long as any of the Revolving Credit Commitments
are in effect and until payment in full of the principal of and interest on all
Loans hereunder and all other amounts payable by each Obligor hereunder and the
expiration or termination of all Letters of Credit:
9.01 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall deliver
to each of the Banks and the U.S. Agent:
(a) (i) [Intentionally omitted]
(ii) as soon as available and in any event within 45 days after the end of
each of the first three fiscal quarterly periods of each fiscal year of the
Company, consolidated statements of income, retained earnings and changes in
cash flows of the Company and the Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated balance sheet as at the end of such
period, setting forth in each case for the fiscal quarter of the Company
ending December 31, 1991 and thereafter in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year,
accompanied by a certificate of the senior financial officer of the Company,
which certificate shall state that said financial statements present fairly,
in all material
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respects, the consolidated financial condition and results of
operations of the Company and the Subsidiaries in accordance with GAAP
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after the end of
each fiscal year of the Company, consolidated statements of income, retained
earnings and changes in cash flows of the Company and the Subsidiaries for
such year and the related consolidated balance sheet as at the end of such
year, setting forth in each case for the fiscal year of the Company ending
December 31, 1992 and thereafter in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by an opinion thereon
of an independent certified public accountant of recognized national standing
acceptable to the Majority Banks, which opinion shall state that said
financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations of the Company and
the Subsidiaries as at the end of, and for, such fiscal year, and a
certificate of such accountants stating that, in making the examination
necessary for their opinion, nothing came to their attention, except as
specifically stated, that caused them to believe that the Company had failed
to comply with Sections 9.07, 9.08, 9.09 or 9.12 hereof, or any other
provision hereof, insofar as they relate to accounting matters;
(c) [Intentionally omitted]
(d) promptly upon their becoming available, copies of all registration
statements and annual, periodic or other regular reports, if any, which the
Company and/or any Subsidiary shall have filed with the SEC (or any
governmental agency substituted therefor) or any national securities exchange
(except for those filed on a confidential basis);
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(e) as soon as possible, and in any event by March 31, of each year,
monthly projections substantially similar in form and scope to the Management
Financial Forecasts for each month of such year;
(f) [Intentionally omitted]
(g) as soon as possible, and in any event within ten days after a
Responsible Officer of the Company knows or has reason to know that any of
the events or conditions specified below with respect to any Plan or
Multiemployer Plan have occurred or exist, a statement signed by the senior
financial officer of the Company setting forth details respecting such event
or condition and the action, if any, which the Company or its ERISA Affiliate
proposes to take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by the Company or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA and
the regulations issued thereunder, with respect to a Plan, as to which PBGC
has not by regulation waived the requirement of Section 4043(a) of ERISA
that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance with Section 412(d)
of the Code;
(ii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has
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been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by the Company or any ERISA
Affiliate under Section 4201 or 4204 of ERISA from a Multiemployer
Plan, or the receipt by the Company or any ERISA Affiliate of notice
from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA; and
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Guarantor or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days;
(h) promptly after any Responsible Officer of any Obligor knows or
has reason to know that any Default has occurred, a notice of such Default,
describing the same in reasonable detail;
(i) promptly after any Responsible Officer of any Obligor knows or
has reason to know that any mandatory prepayment event as set forth in
Section 3.03(c) hereof has occurred, a notice of such event, describing the
same in reasonable detail;
(j) as soon as possible, and in any event within ten days after any
Responsible Officer of the Company knows or has reason to know that any
Obligor has received notice from any governmental authority to the effect
that such Obligor is not in compliance with the Environmental Laws or the
permits, licenses or authorizations referred to in Section 8.16 hereof, a
notice of such circumstance describing the same in reasonable detail;
(k) promptly after any Responsible Officer of any Obligor knows or
has reason to know that any Product Recall
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Event has occurred, a notice of such Product Recall Event, describing the
same in reasonable detail (and appending any notice from the CPSC or
proposed product recall plan and other documents relating thereto); and
(l) from time to time such other information regarding the business,
affairs or financial condition of the Company or any of the Subsidiaries
(including, without limitation, (i) any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA and (ii)
unaudited consolidating financial statements for the Company and the
Subsidiaries) as any Bank or either Agent may reasonably request.
The Company will furnish to each Bank and the U.S. Agent, (1) at the time it
furnishes each set of financial statements pursuant to paragraph (a)(ii) or (b)
above, (A) a Certificate (a "COMPLIANCE CERTIFICATE") substantially in the form
of Exhibit G hereto signed by the senior financial officer of the Company (i)
to the effect that no Default has occurred and is continuing (or, if any
Default has occurred and is continuing, describing the same in reasonable
detail and describing the steps being taken to remedy the same), (ii) setting
forth in reasonable detail the computations necessary to determine whether the
Company is in compliance with Sections 9.07, 9.08 and 9.09 hereof (based upon
the financial statements adjusted to eliminate the effects of FAS 109, as
reflected in the Reconciliation Statement), as of the end of the respective
fiscal quarter or fiscal year and, in the case of the certificate accompanying
financial statements delivered pursuant to paragraph (b) above, setting forth
in reasonable detail the computations necessary to determine the Clean-Down
Limit for the related fiscal year of the Company and (iii) setting forth the
amount of Casualty Insurance Proceeds and Disposition Proceeds received during
such fiscal quarter or fiscal year); and (B) a statement (a "RECONCILIATION
STATEMENT") substantially in the form of Exhibit L hereto signed by the senior
financial officer of the Company that displays, on a line-by-line basis, the
difference between the financial statements provided pursuant to paragraph
(a)(ii) or (b) above (as the case may be) and such financial statements if the
same were not
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adjusted for FAS 109; (2) on the first Business Day following the
end of each Clean-Down Period, a statement (a "PARENT ADVANCE STATEMENT")
substantially in the form of Exhibit M hereto, signed by a senior financial
officer of the Company that sets forth (i) the daily outstanding principal
amount of the Revolving Credit Loans and Bank Line Loans during such Clean-Down
Period, (ii) the daily outstanding principal amount of the Parent Advances
during such Clean-Down Period and (iii) the daily outstanding principal amount
of the Clean-Down Parent Advances for such Clean-Down Period; and (3) on the
date on which the Company pays the Holdings Dividend, a certificate of the
chief financial officer of the Company stating that the Holdings Dividend is
paid and after giving effect thereto (i) the aggregate value of all Properties
of the Company and its Subsidiaries at their present fair saleable value (i.e.,
the amount that may be realized within a reasonable time, considered to be six
months to one year, either through collection or sale at the regular market
value, conceiving the latter as the amount that could be obtained for the
Property in question within such period by a capable and diligent businessman
from an interested buyer who is willing to purchase under ordinary selling
conditions), exceed the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of the
Company and its Subsidiaries, (ii) the Company and its Subsidiaries will not,
on a consolidated basis, have an unreasonably small capital with which to
conduct their business operations as heretofore conducted and (iii) the Company
and its Subsidiaries will have, on a consolidated basis, sufficient cash flow
to enable them to pay their debts as they mature.
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9.02 LITIGATION, ETC. The Company shall:
(a) promptly after making the judgment described below, give notice to
each Bank and the U.S. Agent of any legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory authority or agency,
affecting any Obligor or any of its Subsidiaries which, if adversely
determined, in the reasonable judgment of the Company would have a material
adverse effect on the prospects, business, operations or financial condition
of the Company and the Subsidiaries taken as a whole; and
(b) promptly after a Responsible Officer of the Company knows or has
reason to know of the same, give notice to each Bank and the U.S. Agent of
the issuance by any United States Federal or state court or any United States
Federal or state regulatory authority of any injunction, order or other
restraint prohibiting, or having the effect of prohibiting or delaying, the
making of Loans or the issuance of Letters of Credit, the institution of any
litigation or similar proceedings seeking any such injunction, order or other
restraint.
9.03 CORPORATE EXISTENCE, ETC. Each Obligor shall, and shall cause each of
its Subsidiaries to, preserve and maintain its corporate existence and all of
its material rights, privileges and franchises; comply with the requirements of
all applicable laws, rules, regulations and orders of governmental or
regulatory authorities (including, without limitation, any thereof referred to
in Section 8.16 hereof) if failure to comply with such requirements would
materially and adversely affect the prospects, business, operations or
financial condition of such Obligor and its Subsidiaries taken as a whole; pay
and discharge all taxes, assessments and governmental charges or levies imposed
on it or on its income or profits or on any of its property prior to the date
on which penalties attach thereto, except for any such tax, assessment, charge
or levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained; maintain
all of its properties used or useful in its business in good
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working order and condition, ordinary wear and tear excepted; permit
representatives of any Bank or either Agent, during normal business hours, to
examine, copy, and make extracts from its books and records (at such Bank's
expense except during the occurrence and continuance of a Default), to inspect
its properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by such Bank or such Agent (as the case may
be); and promptly upon the request of any Bank (which request shall be made in
good faith and on a reasonable basis in light of statutes, regulations,
directives and interpretations applicable to such Bank, whether or not having
the force of law) the Company shall authorize the U.S. Agent to obtain (at the
expense of the Company), and shall cooperate in order to permit the U.S. Agent
to obtain, appraisals in form and substance satisfactory to the U.S. Agent and
the Majority Banks on any property subject to any Mortgage.
9.04 USE OF PROCEEDS. Each Borrower shall use the proceeds of the Loans
hereunder solely as provided in Section 8.06 hereof in compliance with all
applicable legal and regulatory requirements, including, without limitation,
Regulation G, Regulation T, Regulation U or Regulation X and the Securities Act
of 1933, as amended and the Securities Exchange Act of 1934, as amended and the
regulations thereunder.
9.05 [Intentionally omitted]
9.06 [Intentionally omitted]
9.07 INTEREST COVERAGE RATIO. The Company shall not permit the Interest
Coverage Ratio to be less than 2.25 to 1.00.
9.08 LEVERAGE RATIO. The Company shall not, at any time during any period
set forth below, permit the Leverage Ratio to exceed the ratio set forth
opposite such period:
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Period Leverage Ratio
------ --------------
During the first and second
fiscal quarter of each
fiscal year of the Company .51 to 1
During the third and fourth
fiscal quarter of each
fiscal year of the Company .54 to 1
9.09 NET WORTH. The Company shall not, at any time permit its Net Worth to
be less than $130,000,000 LESS the amount of the Holdings Dividend.
9.10 INDEPENDENT OBLIGATIONS OF PSC. PSC hereby acknowledges and confirms
that each of the obligations set forth in this Section 9 that refer to PSC in
its capacity as a Subsidiary of the Company shall be observed by PSC in its
independent corporate capacity.
9.11 [Intentionally omitted]
9.12 RESTRICTED PAYMENTS. Except for the Holdings Dividend, the Company
shall not, and shall not permit any of the Subsidiaries to, declare or make any
Restricted Payments; PROVIDED that the Company may during any Restricted
Payments Period make Restricted Payments, subject to the satisfaction of the
following conditions on the date of such Restricted Payment and after giving
effect thereto:
(a) no Default has occurred or is continuing; and
(b) the aggregate amount of Restricted Payments made in any Restricted
Payments Period shall not exceed the lesser of (A) the quotient of the sum of
(i) Cash Flow of the Company and its Subsidiaries for the Computation Period
ending December 31 of the immediately preceding fiscal year of the Company
MINUS (ii) Fixed Charges of the Company and its Subsidiaries for such
Computation Period DIVIDED BY 1.05 and (B) the amount of the net income of
the Company and its
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Subsidiaries for such Computation Period; PROVIDED that
the Company shall be permitted to make Restricted Payments in such Restricted
Payments Period in excess of the limit set forth in this paragraph (b) so
long as (x) the Leverage Ratio as at the last day of such Computation Period
(computed by deducting from the Net Worth of the Company the proposed
Restricted Payment to be made pursuant to this Section 9.12) is less than or
equal to .35 to 1 and (y) the Interest Coverage Ratio for such Computation
Period is equal to or greater than 4.0 to 1.
9.13 LIMITATION ON CONSOLIDATION, MERGER, ACQUISITIONS AND DISPOSITIONS.
The Company shall not, and shall not permit any of the Subsidiaries to:
(a) consolidate with or merge into any other Person or permit any other
Person to consolidate with or merge into it except, if no Default has
occurred and is continuing (or upon giving effect to the subject transaction
will occur) (i) so long as a Wholly-Owned Subsidiary is the surviving
corporation, any Subsidiary may consolidate with or merge into another
Subsidiary or (ii) so long as the Company is the surviving corporation, any
Subsidiary or a Person acquired in an Acquisition permitted by Section
9.13(b) hereof may consolidate with or merge into the Company;
(b) consummate any Acquisition except the Company and the Subsidiaries may
make Acquisitions (i) with respect to the period from and including the
Amendment Effective Date to but excluding the first day of the Restricted
Payment Period occurring in 1995, for an aggregate consideration up to but
not exceeding $3,000,000 and (ii) with respect to each Acquisition Period of
the Company, for an aggregate consideration up to but not exceeding the sum
of (A) $3,000,000 PLUS (B) an amount equal to the excess of (x) the amount of
Restricted Payments permitted to be made by the Company pursuant to Section
9.12 hereof during such Acquisition Period OVER (y) the amount of Restricted
Payments made by the Company pursuant to Section 9.12 hereof during such
Acquisition Period; or
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(c) make any Disposition of (whether in one transaction or in a series of
related transactions) any of its Property (as defined below), whether now
owned or hereafter acquired, except (i) that the Company or any of its
Subsidiaries may make a Disposition (the "PROPOSED DISPOSITION") of Property
on any date if the Aggregate Disposition Revenue (as defined below) does not
exceed an amount equal to 15% of the revenue of the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) for the twelve- month period ending on the Disposition
Date (as defined below); (ii) for sales of Inventory in the ordinary course
of business; or (iii) for sales of obsolete or worn-out property, tools or
equipment no longer used or useful in its business.
For purposes of this Section 9.13, the following terms shall have the
following meanings:
"AGGREGATE DISPOSITION REVENUE" shall mean, collectively, (i) the Revenue of
all Property that has been Disposed of since the Amendment Effective Date
pursuant to Section 9.13(c)(i) hereof and (ii) the Revenue of the Property
that is subject to the Proposed Disposition.
"DISPOSITION DATE" shall mean, for any Disposition, the last day of the
fiscal quarter ending on or most recently ended prior to the date of such
Disposition.
"REVENUE" shall mean, for any Property, the amount of revenue produced by
such Property for the twelve-month period ending on the Disposition Date of
such Property.
9.14 LIENS. The Company shall not, and shall not permit any of the
Subsidiaries to, create, assume, incur or suffer to exist any Lien upon any of
its assets, whether now owned or hereafter acquired, except:
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(a) Liens in existence on the Amendment Effective Date and described in
Schedule IV hereto;
(b) Liens for taxes, assessments and governmental charges, duties or
levies (including, without limitation, under Section 412(n) of the Code)
imposed upon it or upon its income or profits or upon any of its property,
real or personal, or any part thereof if the same shall not at such time be
due and payable or are being contested in good faith by appropriate
proceedings and for the payment of which adequate
reserves have been established;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
suppliers', transporters' or other like Liens arising in the ordinary course
of business which are not overdue for a period of more than 30 days or which
are being contested in good faith and by appropriate proceedings;
(d) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(e) 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 incurred in
the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of property
or minor imperfections in title thereto which, in the aggregate, are not
material in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct
of the business of the Company or the Subsidiaries;
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(g) judgment Liens bonded pending appeal and landlord Liens not involving
Indebtedness;
(h) purchase money security interests securing purchase money obligations,
provided that no such security interest shall extend to property other than
goods and equipment purchased contemporaneously with or as a result of the
incurring of such purchase money obligation and improvements and additions
thereto;
(i) security interests attendant to, and contemporaneously arising out of
the incurrence of, Capital Lease Obligations, provided that no such security
interest shall extend to property other than the property leased and
improvements and additions thereto;
(j) [Intentionally omitted]
(k) Liens pursuant to the Security Documents;
(l) Liens in favor of the Issuing Bank or any Bank that is an issuer of
Bank Letters of Credit on documents of title or similar documents (and on the
underlying property) relating to the transaction subject of a Letter of
Credit or a Bank Letter of Credit (but on no other property);
(m) Liens arising out of contracts for the purchase and sale of
obligations issued by the government of the United States referred to in
Section 9.17(b) hereof on such obligations (but on no other property); and
(n) Liens in addition to the foregoing securing obligations other than
indebtedness for borrowed money and extending to property (other than
Receivables, Inventory or Pledged Shares (as defined in any Pledge Agreement))
having a fair market value of less than U.S.$250,000 (or a U.S. Dollar
Equivalent) in the aggregate as to all such Liens.
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9.15 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this
Agreement, the Company shall not, and shall not permit any of the Subsidiaries
to, directly or indirectly: (a) make any Investment in an Affiliate; (b)
transfer, sell, lease, assign or otherwise dispose of any assets to an
Affiliate; (c) merge into or consolidate with or purchase or acquire assets
from an Affiliate; or (d) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate (including, without
limitation, Guarantees and assumptions of obligations of an Affiliate);
provided that (i) payments on Parent Advances expressly permitted by Section
9.18(b) hereof and in accordance with Section 9.16 hereof may be made, (ii) the
Company may reimburse Majority Interest Parties, Minority Interest Parties or
Holdings for out-of-pocket costs and expenses incurred by such Persons on
behalf of the Company; (iii) [Intentionally omitted]; (iv) payments to NACCO or
Holdings, as applicable, (including, without limitation, repayments of Tax
Sharing Advances) pursuant to the Tax Sharing Agreement and payments to NACCO
(including, without limitation, repayments of Proctor-Silex Tax Sharing
Advances) pursuant to the Proctor-Silex Tax Sharing Agreement relating to the
period prior to the Closing Date; (v) subject to any restriction or limitation
set forth in, or the terms of, this Agreement or any Supplemental Agreement,
the Company and the Subsidiaries may enter into any transaction with an
Affiliate providing for the leasing of property, the rendering or receipt of
services or the purchase or sale of product, Inventory and other assets in the
ordinary course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to such corporation as the
monetary or business consideration which would obtain in a comparable arm's
length transaction with a Person not an Affiliate; (vi) any Affiliate who is an
individual may serve as a director, officer or employee of the Company or any
Subsidiary and receive reasonable compensation for his or her services in such
capacity; (vii) subject to any restriction or limitation set forth in, or the
terms of, this Agreement or any Supplemental Agreement, the Company may make
payments (other than Restricted Payments) expressly required to be made by the
Company under the Reorganization Documents; and (viii) in addition to the
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transactions permitted in clauses (i) through (vii) above (inclusive), subject
to any other restriction or limitation set forth in, or the terms of, this
Agreement or any Supplemental Agreement, the Company may enter into other
transactions with Affiliates in any fiscal year of the Company so long as the
aggregate amount of cash or other property received by Affiliates from the
Company in such fiscal year does not exceed U.S.$500,000.
9.16 MAJORITY INTEREST DEBT AND MINORITY INTEREST DEBT. The Company shall
not, and shall not permit any of the Subsidiaries to, make any payment in
respect of any Majority Interest Debt (including, without limitation, any
Parent Advances) or any Minority Interest Debt (including, without limitation,
any Parent Advances) if (i) at the time a Default has occurred (or as a result
of such payment will occur) and be continuing, (ii) after giving effect to such
payment the Company shall have a combination of cash on hand and unutilized
Revolving Credit Commitments (to the extent available for working capital
purposes) totalling less than U.S.$10,000,000 or (iii) the Company is not in
compliance with its obligations under Section 9.07 hereof. In addition to the
foregoing, the Company will not make any payment with respect to the principal
of any Clean-Down Parent Advances until after the last day of a Clean-Down
Period during which the Company did not have any Clean-Down Parent Advances
outstanding during such Clean-Down Period.
9.17 INVESTMENTS. The Company shall not, and shall not permit any of the
Subsidiaries to, make or permit to remain outstanding any Investment in any
Person except:
(a) Investments in existence on the Amendment Effective Date and reflected
in the financial statements referred to in Section 8.02(b)(ii) or
8.02(b)(iv) hereof;
(b) Investments in obligations issued by the government of the United
States (including contracts for the purchase and sale thereof (such as
repurchase or reverse repurchase agreements) with Banks or banks having
capital and surplus of at least U.S.$500,000,000 or other financial
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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institutions having a net worth of at least U.S.$500,000,000), certificates
of deposit of, and other bank accounts with, Banks or banks having their
principal office located in the United States or London having capital and
surplus of at least U.S.$500,000,000, and commercial paper rated A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investor's Service, Inc.,
issued by a United States issuer rated not less than "A" by such rating
agencies;
(c) in the case of PSC, obligations of the government of Canada, bank
accounts or time deposits with banks chartered under the Canadian Bank Act,
and commercial paper rated R-1 by the Dominion Bond Rating Service or P-1 by
C.B.R.S., Inc. issued by a Canadian issuer rated not less than "A" by the
Dominion Bond Rating Service or the Canadian Bond Rating Service;
(d) in the case of PSM, certificates of deposit issued by, and demand and
time deposits with, Mexican national commercial banks which are among the six
largest commercial banks in Mexico;
(e) Intercompany Receivables payable to the Company by its Subsidiaries;
(f) [Intentionally omitted]
(g) Intercompany Receivables payable to the Subsidiaries of the Company by
the Company in an aggregate outstanding amount not to exceed at any time the
excess (if any) of (i) U.S.$25,000,000 OVER (ii) the aggregate outstanding
principal amount of Intercompany Advances by the Subsidiaries of the Company
to the Company at such time;
(h) [Intentionally omitted]
(i) Intercompany Advances by the Company or any Subsidiary permitted under
Section 9.18 hereof;
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(j) Investments in any Person pursuant to a merger, consolidation or
Acquisition permitted under Section 9.13(a) or 9.13(b) hereof;
(k) Investments consisting of capital contributions to newly-formed
Subsidiaries; and
(l) [Intentionally omitted]
9.18 INDEBTEDNESS. The Company shall not, and shall not permit any of the
Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness incurred hereunder;
(b) Parent Advances in an aggregate outstanding principal amount not to
exceed U.S.$35,000,000;
(c) Intercompany Advances by the Company to its Subsidiaries in an
aggregate outstanding principal amount not to exceed at any time the excess
(if any) of (i) U.S.$25,000,000 OVER (ii) the aggregate outstanding amount of
Intercompany Receivables payable to the Company by its Subsidiaries at such
time;
(d) [Intentionally omitted]
(e) Intercompany Advances by the Subsidiaries of the Company to the
Company;
(f) [Intentionally omitted]
(g) Capital Lease Obligations of the Company and the Subsidiaries in an
aggregate principal amount outstanding (as to the Company and the
Subsidiaries taken together) not to exceed U.S.$10,000,000;
(h) [Intentionally omitted]
(i) [Intentionally omitted]
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(j) [Intentionally omitted]
(k) lines of credit (inclusive of Bank Line Loans) and letters of credit
(inclusive of Bank Letters of Credit) in an aggregate principal (or face)
amount not to exceed U.S.$30,000,000 so long as the outstanding principal of
such lines of credit (other than Bank Line Loans) is reduced to zero during
each Clean-Down Period;
(l) Tax Sharing Advances so long as such Tax Sharing Advances are
unsecured and are payable in accordance with the Tax Sharing Agreement;
(m) Proctor-Silex Tax Sharing Advances so long as such Proctor-Silex Tax
Sharing Advances relate to the period prior to the Closing Date, are
unsecured and are payable in accordance with the Proctor-Silex Tax Sharing
Agreement;
(n) [Intentionally omitted]
(o) unsecured Indebtedness (other than letters of credit) so long as (i)
such Indebtedness has an average life of less than three years and (ii) the
outstanding principal amount of such Indebtedness is reduced to zero during
each Clean-Down Period; and
(p) Subordinated Indebtedness of the Company so long as (i) such
Indebtedness has an average life longer than the average life of the Loans
hereunder and (ii) the terms of such Indebtedness are no more restrictive than
the terms of this Agreement.
9.19 [Intentionally omitted]
9.20 TYPE OF BUSINESS. The Company shall not, and shall not permit any of
the Subsidiaries to, enter into any new lines of business which are materially
different from, and unrelated to, the lines of business conducted by the
Company and the Subsidiaries on the Amendment Effective Date which lines of
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business currently include the design, manufacture and sale of consumer
electric appliances and other consumer houseware products.
9.21 HEDGING ARRANGEMENTS.
(a) [Intentionally omitted]
(b) The Company shall not, and shall not permit any of the Subsidiaries to,
enter into Interest Rate Protection Arrangements with respect to interest on
an aggregate notional principal amount at any time in excess of (i) with
respect to such arrangements that extend less than one year from the creation
thereof, U.S.$120,000,000 and (ii) with respect to such arrangements that
extend more than or equal to one year from the creation thereof,
U.S.$75,000,000.
(c) The Company shall not, and shall not permit any of the Subsidiaries to,
enter into Foreign Currency Hedging Arrangements under which exposure
(defined as the total amount outstanding under such arrangements) of the
Company and the Subsidiaries exceeds U.S.$25,000,000 at any time.
9.22 INSURANCE. The Company shall maintain, and shall cause each of the
Subsidiaries to maintain, insurance with responsible companies in such amounts
and against such risks as is usually carried by owners of similar businesses
and properties in the same general areas in which the Company and the
Subsidiaries operate (and with such deductibles and levels of self-insurance as
are usually maintained by owners of similar businesses and properties in the
same general areas in which the Company and the Subsidiaries operate and as are
consistent with the Company's practices as of the date of the execution and
delivery hereof), provided that in any event the Company will maintain:
(1) CASUALTY INSURANCE -- insurance against loss or damage covering all of
the tangible real and personal property and improvements of the Company and
the Subsidiaries by reason of any Peril in amounts (i) in the
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case of the fixed assets, plant and equipment as shall be reasonable
and customary but in no event in an amount less than the greater of (x) the
amount applicable to any such property or improvements necessary to avoid the
insured named therein from becoming a co-insurer of any loss under such
policy or (y) U.S.$70,000,000 and (ii) in the case of Inventory, not less
than the greater of the fair market value thereof or the amounts necessary to
avoid the insured named therein from becoming a co-insurer of any loss under
such policy.
(2) AUTOMOBILE LIABILITY INSURANCE FOR BODILY INJURY AND PROPERTY DAMAGE
-- insurance in respect of all vehicles (whether owned, hired or rented by
the Company or any of the Subsidiaries) in such amounts as are then customary
for vehicles used in connection with similar property and businesses, but in
any event to the extent required by applicable law.
(3) COMPREHENSIVE GENERAL LIABILITY INSURANCE -- insurance against claims
for bodily injury, death or property damage occurring on, in or about the
facilities owned, leased or used by the Company and the Subsidiaries
(including adjoining streets, sidewalks and waterways), in such amounts as
are then customary for property similar in use and located in the same state
or country.
(4) WORKERS' COMPENSATION INSURANCE -- insurance (including Employers'
Liability Insurance) to the extent required by applicable law.
(5) PRODUCT LIABILITY INSURANCE -- insurance against claims for bodily
injury, death or property damage resulting from the use of products sold by
the Company or any of the Subsidiaries in such amounts as are then
customarily maintained by responsible persons engaged in businesses similar
to that of the Company and the Subsidiaries.
(6) BUSINESS INTERRUPTION INSURANCE -- insurance against loss of operating
income (up to an aggregate amount
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equal to U.S.$10,000,000) by reason of any Peril affecting the operations
of the Company or any of the Subsidiaries.
Such insurance shall be written by financially responsible companies selected
by the Company and having an A. M. Best rating of "A" or better and being in a
financial size category of VI or larger, or by other companies acceptable to
the Majority Banks, and (other than workers' compensation insurance) shall name
the U.S. Agent or the Canadian Agent, as relevant, as loss payee (in the case
of insurance described in items (1) and (6) above) or as an additional named
insured (in the case of the insurance described in items (2), (3), (4) and (5)
above), in each case as its interests may appear. Each policy referred to in
this Section 9.22 shall provide that it will not be canceled or reduced except
after not less than 60 days' written notice to the U.S. Agent and the Canadian
Agent and shall also provide that the interests of the U.S. Agent and the
Canadian Agent, the Issuing Bank and the Banks shall not be invalidated by any
act or negligence of the Company, any of the Subsidiaries or any Person having
an interest in any facility owned, leased or used by the Company and the
Subsidiaries nor by occupancy or use of any facility owned, leased or used by
the Company and the Subsidiaries for purposes more hazardous than permitted by
such policy nor by any foreclosure or other proceedings relating to any
facility owned, leased or used by the Company and the Subsidiaries. The
Company will advise the U.S. Agent and the Canadian Agent promptly of any
policy cancellation, reduction or amendment.
Upon each April 15 in each year the Company will deliver to the U.S. Agent
and the Canadian Agent certificates of insurance evidencing that all insurance
required to be maintained by the Company hereunder will be in effect through
the April 1 of the calendar year following the calendar year of the current
April 1, subject only to the payment of premiums as they become due and the
right of the respective insurer to cancel or reduce the respective policy upon
no less than 60 days' written notice to the U.S. Agent and the Canadian Agent
as provided in the preceding paragraph. The Company will not obtain or carry
separate insurance concurrent in form or contributing in the
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event of loss with that required by this Section 9.22 unless the U.S. Agent or
the Canadian Agent, as relevant, is the named insured thereunder, with loss
payable as provided herein. The Company will immediately notify the U.S. Agent
and the Canadian Agent whenever any such separate insurance is obtained and
shall deliver to the U.S. Agent the certificates evidencing the same.
If a Default shall not have occurred and be continuing and the insurance
proceeds in question are in an amount less than U.S.$2,000,000 or if such
insurance proceeds relate to property of PSM, all claims under insurance
policies in which either Agent is named loss payee or
additional named insured ("SUBJECT POLICIES") will be adjusted solely between
the relevant Obligor and the insurer and insurance proceeds under Subject
Policies (including, without limitation, Casualty Insurance Proceeds) will be
paid to the relevant Obligor and will be used, as promptly as practicable, to
replace or repair assets lost or damaged. If a Default has occurred and is
continuing or the insurance proceeds in question are in an amount greater than
or equal to U.S.$2,000,000, except in the case of insurance proceeds relating
to property of PSM (which shall be treated in the manner described in the
preceding sentence), all claims under Subject Policies will be adjusted between
the relevant Obligor and the insurer, subject to approval by the relevant Agent
and insurance proceeds under Subject Policies (including, without limitation,
Casualty Insurance Proceeds) payable to the Company or PSC will be paid, in the
case of the Company, to the U.S. Agent to be held in the Cash Collateral
Account as "Collateral" under and as defined in the Security Agreement and, in
the case of PSC, to the Canadian Agent to be held in the Canadian Cash
Collateral Account as "Collateral" under, and as defined in, the General
Security Agreement referred to in clause (ii) of the definition of "Canadian
Security Documents" in Section 1.01 hereof.
Notwithstanding anything contained in this Section 9.22 to the contrary, to
the extent that compliance with the provisions of this Section 9.22 would
contravene any provisions regarding insurance (including, without limitation,
loss payee or additional named insured requirements) contained in any lease in
existence as of the date of the execution and delivery of this
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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Agreement (or any renewal, any extension or replacement thereof containing
substantially similar provisions regarding insurance) in which any of the
Company or the Subsidiaries is a tenant, the insurance provisions contained in
such lease shall control, and the Company or the Subsidiaries, as the case may
be, shall not be required to comply with the provisions of this Section 9.22,
in each case to the extent that compliance with the provisions of this Section
9.22 would contravene the insurance provisions contained in such lease.
9.23 ADDITIONAL COLLATERAL.
(a) [Intentionally omitted]
(b) If at any time the amount of Receivables payable (or to be payable)
under Government Contracts could exceed U.S.$2,000,000 (or a U.S. Dollar
Equivalent), the Company shall, and shall cause each of the Subsidiaries to,
as promptly as practicable, execute and deliver to the Agents assignments,
security agreements or other documents of like intendment in form and
substance satisfactory to the Majority Banks (and, in the case of each
Government Contract with the government of the United States or an agency or
instrumentality thereof, a Government Contract Assignment) creating (to the
extent not theretofore created by the Security Documents) first priority
perfected Liens in favor of the relevant Agent for the benefit of such Agent,
the Issuing Bank and the Banks in such Government Contracts, subject to no
equal or prior Lien except Liens permitted pursuant to Section 9.14 hereof,
together with such certificates, documents, legal opinions and evidence of
filings or recordations as either Agent or any Bank may reasonably require to
evidence the perfection and first priority of such Liens in accordance with
the terms of this Agreement and the Security Documents.
(c) The Company shall do all things as may be reasonably required by the
Agents and the Majority Banks and execute and deliver to the relevant Agent
or, if applicable, each Bank such documents and other instruments (including,
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without limitation, mortgages, deeds of trust, supplemental or substitute
notes), in form and substance satisfactory to the Agents and Majority Banks,
as may be required in order to create and maintain the validity and priority
of the Lien of any Mortgage.
(d) The Company shall not, and shall not permit any of the Subsidiaries
to, enter into or suffer to exist any agreement or instrument containing a
provision that would prevent or inhibit the Company or the Subsidiaries from
creating a Lien in favor of either Agent for the benefit of the Issuing Bank
and the Banks on any property (real or personal, tangible or intangible) of
the Company or the Subsidiaries, whether now owned or hereafter acquired,
except any agreement or instrument that would create a Lien permitted under
Section 9.14 hereof (but only with respect to the property subject to such
Lien).
9.24 CERTAIN AMENDMENTS. The Company shall not be party to or acquiesce
in, or permit any of the Subsidiaries to be a party to or acquiesce in, any
amendment, supplement or modification to, or waiver of any provisions of (a)
any of the Reorganization Documents, any of the Existing Hamilton Beach
Acquisition Documents, any of the Existing Proctor-Silex Acquisition Documents,
the Existing Altoona Purchase and Sale Agreement, the Existing Alcoa Stock
Purchase Agreement or the Existing WearEver Purchase and Sale Agreement (other
than amendments, supplements or modifications to, or waivers of provisions of,
the Reorganization Agreement or the Shareholders Agreement (other than Sections
7 or 8 of the Reorganization Agreement or Sections 4.2 or 6.3.3 of the
Shareholders Agreement) as to which the Agents and the Banks have had 20
Business Days' prior notice and that do not have any material adverse effect on
(i) the prospects, business, operations or financial condition of the Company
and the Subsidiaries taken as a whole; (ii) the timely payment of the principal
of, or interest on, the Loans or the Letter of Credit Obligations; or (iii) the
enforceability of this Agreement, any Security Document, any Minority Interest
Document, any Majority Interest Document or any Note or the rights of either
Agent, any Bank or the Issuing Bank hereunder or
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thereunder); (b) [Intentionally omitted]; (c) [Intentionally omitted] (d) the
Proctor-Silex Tax Sharing Agreement or the applicable Tax Sharing Agreement (in
the case of the Proctor- Silex Tax Sharing Agreement and the Tax Sharing
Agreement referred to in clause (i) of the definition of "Tax Sharing
Agreement" in Section 1.01 hereof, solely as the same affects the obligations
of the Company to make payments to NACCO and the obligations of NACCO to make
payments (as Proctor-Silex Tax Sharing Advances, Tax Sharing Advances or
otherwise) to the Company); (e) [Intentionally omitted] or (f) any promissory
note evidencing Parent Advances or other documentation governing Majority
Interest Debt or Minority Interest Debt, without the prior written consent of
the Majority Banks. The Company shall furnish to the Agents and the Banks
copies of each amendment, modification or supplement to the Tax Sharing
Agreement, the Proctor-Silex Tax Sharing Agreement, the Reorganization
Agreement and the Shareholders Agreement promptly after the execution and
delivery thereof.
9.25 [Intentionally omitted]
9.26 SUBSIDIARY DIVIDEND PAYMENTS. PSM and PSC may make Subsidiary
Dividend Payments to the Company at any time or from time to time.
9.27 MATERIAL SUBSIDIARIES.
(a) The Company shall, and shall cause each of the Subsidiaries to,
promptly upon receipt, pledge with, and grant a security interest in favor
of, the U.S. Agent any shares of capital stock of, or other ownership
interests in, any Material Subsidiary to the maximum extent possible without
imposing any adverse tax consequences on the Company arising out of Section
956 of the Code or any other materially adverse tax consequences on the
Company.
(b) The Company shall promptly cause each Person which becomes a Material
Subsidiary after the date of the execution and delivery of this Agreement
and which is not a Guarantor to become a Guarantor hereunder and to grant to
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the U.S. Agent for the benefit of the Banks a Lien upon its property
(whether real or personal, tangible or intangible) in each case to the
maximum extent possible without imposing any adverse tax consequences on the
Company arising out of Section 956 of the Code or any other materially
adverse tax consequences on the Company.
(c) The Company shall, and shall cause each of the Subsidiaries to,
execute and deliver such documents as shall be in form and substance
satisfactory to the Agents to accomplish the transactions contemplated by
paragraphs (a) and (b) above (accompanied by such certificates, documents and
legal opinions as the Agents may reasonably request).
9.28 [Intentionally omitted]
Section 10. EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) Any Obligor shall default in the payment of any principal of any Loan
or any Reimbursement Obligation; or any Obligor shall default in the payment
of any interest on any Loan or any other amount payable by it hereunder,
under any Security Document or under any Letter of Credit Document and such
default shall continue unremedied for 2 days after the occurrence thereof; or
(b) (i) Any Obligor or any of its Subsidiaries shall default in the payment
when due of any principal of or interest on any of its other Indebtedness
aggregating U.S.$500,000 or more (or a U.S. Dollar Equivalent); or (ii) any
event specified in any note, agreement, indenture or other document
evidencing or relating to any of its other Indebtedness aggregating
U.S.$500,000 or more (or a U.S. Dollar Equivalent) shall occur if the effect
of such event is to cause, or (after giving effect to any applicable notice
requirements or applicable grace periods or both) to permit the holder or
holders of such Indebtedness, or a
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trustee or agent on behalf of such holder or holders to cause, such
Indebtedness to become due prior to its stated maturity; or
(c) Any representation, warranty or certification made or deemed made (i)
by any Obligor herein, in the Security Documents or the Letter of Credit
Documents, (ii) by Holdings in any Holdings Document, (iii) by any Majority
Interest Party in any Majority Interest Document, (iv) by any Minority
Interest Party in any Minority Interest Document, or (v) in any certificate
furnished to any Bank or either Agent by any Majority Interest Party, any
Minority Interest Party, Holdings or any Obligor pursuant to the provisions
of any Document, shall prove to have been false or misleading as of the time
made or furnished in any material respect; or
(d) Any Lien created by any Security Document or any Supplemental Security
Document shall at any time upon or after creation thereof cease to be a
perfected Lien on and security interest in the property purported to be
covered thereby, subject to no equal, prior or junior Lien except (i) in the
case of property other than Pledged Shares (as defined in such Security
Documents or such Supplemental Security Documents) consisting of capital
stock of Holdings or the Company, for Liens permitted pursuant to Section
9.14 hereof and (ii) in the case of Pledged Shares consisting of capital
stock of Holdings or the Company, Permitted Parent Liens; or any Security
Document shall cease to be in full force and effect or shall be declared null
and void, or the validity or enforceability thereof shall be contested by any
Obligor or any of its Subsidiaries; or
(e) Any Obligor shall default in the performance of any of their
respective obligations under Sections 9.01(h) or 9.07, 9.08, 9.09, 9.12, 9.13
or 9.14 (other than with respect to non-consensual Liens of the generic type
described in Sections 9.14(b), (c), (d), (e), (f) and (g) hereof
("NON-CONSENSUAL LIENS")), 9.15 through 9.18 (inclusive), 9.21, 9.24 or 9.27
hereof; or any Obligor shall
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default in the performance of any of their respective obligations under
Section 9.14 (with respect to Non-Consensual Liens) hereof and such default
in performance shall continue unremedied for a period of 10 days after the
occurrence thereof; or any Obligor shall default in the performance of any of
its other covenants or agreements in this Agreement and such default shall
continue unremedied for a period of 30 days after the occurrence thereof;
or
(f) Any Corporation shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(g) Any Corporation shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property, (ii) make a
general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition, relief or readjustment of debts (including, without limitation,
in the case of PSC, any proceeding under the Bankruptcy and Insolvency Act
(Canada) any application under the Companies' Creditors Arrangement Act, as
amended from time to time or, with respect to reorganization or relief of
debts, under the Business Corporations Act, 1982 of the Province of Ontario,
as amended from time to time), (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it
in an involuntary case under the Federal Bankruptcy Code or the Bankruptcy
and Insolvency Act (Canada), or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(h) A proceeding or case shall be commenced, without the application or
consent of the affected Corporation, in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or
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the composition, relief or readjustment of its debts (including, without
limitation, in the case of PSC, any proceeding under the Bankruptcy and
Insolvency Act (Canada), any application under the Companies' Creditors
Arrangement Act, as amended from time to time, or, with respect to
reorganization or relief of debt, the Business Corporations Act, 1982 of the
Province of Ontario, as amended from time to time), (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of such Corporation of
all or any substantial part of its assets, or (iii) similar relief in respect
of such Corporation under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days; or an order for
relief against such Corporation shall be entered in an involuntary case under
the Federal Bankruptcy Code; or
(i) A final judgment or judgments for the payment of money in excess of
U.S.$500,000 (or a U.S. Dollar Equivalent) in the aggregate shall be rendered
by a court or courts against any Obligor or any of its Subsidiaries and the
same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 20
days from the date of entry thereof and such Obligor or the relevant
Subsidiary shall not, within said period of 20 days, or such longer period
during which execution of the same shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal; or
(j) An event or condition specified in Section 9.01(g) hereof shall occur
or exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or conditions,
the Company or any ERISA Affiliate shall incur or in the reasonable judgment
of the Majority Banks shall be reasonably likely to incur a liability to a
Plan, a
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Multiemployer Plan or PBGC (or any combination of the foregoing) which is,
in the reasonable judgment of the Majority Banks, material in relation to
the consolidated financial position of the Company and the Subsidiaries; or
(k) At any time: (i) Holdings shall create, assume, incur or suffer to
exist any Lien upon the Company's capital stock (other than pursuant to the
Supplemental Security Documents); or (ii) NACCO shall cease to own, directly
or indirectly through Housewares, at least 51% of the Company's capital
stock; or (iii) any Minority Interest Party or any of its Subsidiaries shall
create, assume, incur or suffer to exist any Lien upon any capital stock of
the Company (other than Permitted Parent Liens); or
(l) Any Obligor shall default in the performance of any of its material
obligations under any Security Document or any Letter of Credit Document or
(notwithstanding Section 10(b) hereof) any Bank Financial Accommodation
Document or any Interest Rate Protection Agreement or any Foreign Currency
Hedging Agreement; or any Obligor shall default in the performance of any of
its other obligations under any Security Document or any Letter of Credit
Document or (notwithstanding Section 10(b) hereof) any Bank Financial
Accommodation Document, any Interest Rate Protection Agreement or any Foreign
Currency Hedging Agreement and such default shall continue for a period of 10
days after the occurrence thereof; or
(m) Any Majority Interest Party shall default in the performance of any of
its material obligations under any Majority Interest Document; or any
Majority Interest Party shall default in the performance of any of its other
obligations under any Majority Interest Document and such default shall
continue unremedied for a period of 10 days after the occurrence thereof; or
any Minority Interest Party shall default in the performance of any of its
material obligations under any Minority Interest Document; or any Minority
Interest Party shall default in the performance of any of its other
obligations under any Minority Interest
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Document and such default shall continue unremedied for a period of 10 days
after the occurrence thereof; or any Majority Interest Document or any
Minority Interest Document shall cease to be in full force and effect (except
in accordance with the express terms thereof) or shall be declared null and
void, or the validity or enforceability thereof shall be contested by any
Majority Interest Party or any Minority Interest Party thereto; or Holdings
shall default in the performance of any of its material obligations under any
Holdings Document; or Holdings shall default in the performance of any of its
other obligations under any Holdings Document and such default shall
continued unremedied for a period of 10 days after the occurrence thereof; or
any Holdings Document shall cease to be in full force and effect (except in
accordance with the express terms thereof) or shall be declared null and
void, or the validity or enforceability thereof shall be contested by
Holdings; or
(n) Any party to any Reorganization Document, any Existing Hamilton Beach
Acquisition Document, any Existing Proctor-Silex Acquisition Document, the
Existing Altoona Purchase and Sale Agreement, the Existing Alcoa Stock
Purchase Agreement or the Existing WearEver Purchase and Sale Agreement shall
default in any material respect in any of its obligations thereunder and such
default shall have a material adverse effect on (i) the prospects, business,
operations or financial condition of the Company and the Subsidiaries taken
as a whole, (ii) the timely payment of the principal of, or interest on, the
Loans or the Letter of Credit Obligations or (iii) the enforceability of this
Agreement, any Security Document, any Majority Interest Document, any
Minority Interest Document or any Note or the rights of either Agent, any
Bank or the Issuing Bank hereunder or thereunder; or
(o) Any Obligor shall be dissolved or liquidated, shall terminate its
existence or suspend its operations or payments (other than as referred to in
clause (g) or (h) of
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this Section 10), or shall lose any right, privilege or franchise necessary
to maintain its juridical existence; or
(p) All or a substantial part of the properties of any Obligor shall be
condemned, seized or otherwise appropriated or custody or control of such
property shall be assumed by any governmental authority or court or other
Person purporting to act under the authority of the government of any
jurisdiction, such Obligor or any such Subsidiary shall be prevented from
exercising normal control over all or a substantial part of its properties;
or
(q) A moratorium shall be declared or otherwise instituted on the payment
of any Indebtedness of any Obligor; or
(r) The Company or any of the Subsidiaries shall merge with or into, or
consolidate with, any Person, or shall Dispose of any of its assets, whether
now owned or hereafter acquired, or shall make any Acquisition, except, in
each case, as expressly permitted under Section 9.13 hereof; or Holdings
shall merge with or into, or consolidate with, any Person; or
(s) The Company or any of the Subsidiaries shall in any manner create,
assume, incur or suffer to exist any Lien on any of its assets, whether now
owned or hereafter acquired, except to the extent expressly permitted under
Section 9.14 hereof (and, in the case of a Default under this Section 10(s)
predicated upon the creation, assumption, incurrence or sufferance to exist
of a Non-Consensual Lien, such Default shall continue unremedied for a period
of 10 days after the occurrence thereof);
THEREUPON: (i) in the case of an Event of Default other than one referred to
in clause (g) or (h) of this Section 10, the Agents (through the U.S. Agent)
may, and upon request of the Majority Banks, the Agents (through the U.S.
Agent) shall, by notice to the Borrowers, cancel the relevant Revolving Credit
Commitments and/or declare the principal amount then outstanding of and the
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accrued interest on the Loans and all other amounts payable by the Borrowers,
as the case may be, under this Agreement and the Notes to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Obligors; and (ii) in the case of the occurrence
of an Event of Default referred to in clause (g) or (h) of this Section 10, the
Revolving Credit Commitments shall automatically be canceled and the principal
amount then outstanding of, and the accrued interest on, the Loans and all
other amounts payable by the Obligors under this Agreement and the Notes shall
become automatically immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Obligors. In addition, upon the occurrence and during the
continuance of any Event of Default (other than one referred to in clause (g)
or (h) of this Section 10), the Company shall, if requested by the U.S. Agent
or the Majority Banks or the Issuing Bank (in either case, through the U.S.
Agent), and, in the case of an Event of Default referred to in clause (g) or
(h) of this Section 10 the Company shall, forthwith without any demand or
taking of any other action by the U.S. Agent, pay to the U.S. Agent (for
deposit in the Cash Collateral Account) an amount equal to the sum of all
Letter of Credit Liabilities in respect of all Letters of Credit.
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Section 11. THE AGENTS.
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11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each of the Banks and the
Issuing Bank hereby irrevocably appoints and authorizes each of the U.S. Agent
and the Canadian Agent to act as its agent hereunder, under each Security
Document, under each Majority Interest Document, under each Minority Interest
Document and under each Holdings Document to which such Agent is a party with
such powers as are specifically delegated to such Agent by the terms of this
Agreement, together with such other powers as are reasonably incidental
thereto. No Agent (which term as used in this sentence and in Section 11.05
hereof and the first sentence of Section 11.06 hereof shall include reference
to its affiliates and its own and its affiliates' officers, directors,
employees and agents): (a) shall have any duties or responsibilities except
those expressly set forth in this Agreement, the Security Documents, the
Majority Interest Documents, the Minority Interest Documents or the Holdings
Documents and shall not by reason of this Agreement, any Security Document, any
Majority Interest Document, any Minority Interest Document or any Holdings
Document, be a trustee for any Bank; (b) shall be responsible to the Banks for
(i) any recitals, statements, representations or warranties contained in this
Agreement or in any of the other documents or certificates or other Documents
referred to, provided for or received by any of them under this Agreement or
any such other document or certificate or other Document, or (ii) for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, any Note or any such other document or certificate or other
Document, or (iii) for any failure by any Obligor or any other Person to
perform any of its obligations hereunder or thereunder, or (iv) for the
validity or effectiveness of any assignment, mortgage, pledge, security
agreement, trust agreement, financing statement, notice of assignment, document
or instrument, or for the filing, recording, re-filing, continuing or
re-recording of any thereof; (c) shall be required to initiate or conduct any
litigation or collection proceedings hereunder; and (d) shall be responsible
for any action taken or omitted to be taken by it hereunder or under any other
Document, except for its own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, except as expressly set forth in
Section 7 hereof, no Agent shall have any responsibility to make,
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or for failure to make, any determination or judgment under Section 7 hereof.
Each Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith. Each Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with such
Agent.
11.02 RELIANCE BY AGENTS. Each Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by such Agent. As to any matters not
expressly provided for by this Agreement, any Security Document, any Majority
Interest Document, any Minority Interest Document or any Holdings Document
(except as the same relate solely to the Issuing Bank and its rights and
obligations hereunder), each Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Majority Banks, and as specified hereunder whenever an Agent acts
or refrains from acting in accordance with the Majority Bank's instructions and
such instructions of the Majority Banks, and any action taken or failure to act
pursuant thereto, shall be binding on all of the Banks. As to matters not
expressly provided for by this Agreement, any Security Document, any Majority
Interest Document, any Minority Interest Document or any Holdings Document
relating solely to the Issuing Bank and its rights and obligations hereunder,
each Agent shall in all cases be fully protected in acting, or in refraining
from acting, hereunder in accordance with instructions signed by the Issuing
Bank, and as specified hereunder whenever an Agent acts or refrains from acting
in accordance with the Issuing Bank's instructions and such instructions of the
Issuing Bank, and any action taken or failure to act pursuant thereto, shall be
binding on all of the Banks.
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11.03 DEFAULTS. The Agents shall not be deemed to have knowledge of the
occurrence of a Default unless notified by a Bank, the Issuing Bank or an
Obligor which notice shall specify such Default and state that such notice is a
"Notice of Default". In the event that either Agent receives such a notice of
the occurrence of a Default, such Agent shall give prompt notice thereof to the
other Agent, the Issuing Bank and the relevant Banks. Each Agent shall
(subject to Section 11.01, 11.05 and 11.07 hereof) take such action with
respect to such Default as shall be directed by the Majority Banks, provided
that, unless and until such Agent shall have received such directions, such
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interest of the Banks.
11.04 RIGHTS AS A BANK. With respect to its Revolving Credit Commitment
and the Loans made by it and, in the case of Chase, Letters of Credit issued by
it, Chase and Chase Canada (and any successors acting as Agents) in their
capacities as Banks (or, in the case of Chase, the Issuing Bank) hereunder
shall have the same rights and powers hereunder as any other Bank (or, in the
case of Chase, the Issuing Bank) and may exercise the same as though they were
not acting as an Agent, and the term "Bank" or "Banks" (and, in the case of
Chase, "Issuing Bank") shall, unless the context otherwise indicates, include
each Agent (or, with respect to Letters of Credit, the U.S. Agent) in its
individual capacity. Chase and Chase Canada (and any successors acting as
Agents) and their affiliates may (without having to account therefor to any
Bank) accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with any Obligor and any of its Subsidiaries
(and any of their respective affiliates) as if it were not acting as an Agent,
and Chase, Chase Canada and their affiliates may accept fees and other
consideration from any Obligor and any of its Subsidiaries and their respective
affiliates for services in connection with this Agreement or otherwise without
having to account for the same to the Banks.
11.05 INDEMNIFICATION. The Banks indemnify each Agent (to the extent not
reimbursed under Section 12.03 hereof, but
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without limiting the obligations of the Company under said Section 12.03),
ratably in accordance with the aggregate principal amount of the Loans made by
the Banks (or, if no Loans, or if only U.S. Dollar Loans or Canadian Dollar
Loans (but not both) are at the time outstanding, ratably in accordance with
their respective Revolving Credit Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against such Agent in any way relating to
or arising out of this Agreement or any of the other Documents or the
transactions contemplated hereby (including, without limitation, the costs and
expenses which the Company is obligated to pay under Section 12.03 hereof but
excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or of any such
other Documents, provided that no Bank shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified.
11.06 NON-RELIANCE ON AGENTS AND OTHER BANKS. Each Bank agrees that it
has, independently and without reliance on either Agent, the Issuing Bank or
any other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and evaluation of each Obligor and
its own decision to enter into this Agreement and that it will, independently
and without reliance upon either Agent, the Issuing Bank or any other Bank, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement. Neither Agent shall be required to keep itself
informed as to the performance or observance by any Obligor of this Agreement
or any other Document or to inspect the properties or books of
any Obligor or any Subsidiary thereof or any other Person. Except for notices,
reports and other documents and information expressly required to be furnished
to the Banks by an Agent hereunder, no Agent shall have any duty or
responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or
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business of any Obligor or any Subsidiary thereof (or any of their respective
Subsidiaries or other affiliates) which may come into the possession of such
Agent or any of its affiliates.
11.07 FAILURE TO ACT. Except for action expressly required of the Agents
hereunder each Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its satisfaction by
the Banks against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action.
11.08 RESIGNATION OR REMOVAL OF AGENTS. Subject to the appointment and
acceptance of a successor Agent as provided below, either Agent may resign at
any time by giving notice thereof to the Banks, the Issuing Bank and the
Company and an Agent may be removed at any time with or without cause by the
Majority Banks. Upon any such resignation or removal, the Majority Banks shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by the Majority Banks and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which in
the case of the U.S. Agent shall be a bank which has an office in New York, New
York, U.S.A. with a combined capital and surplus of at least U.S.$500,000,000
and which in the case of the Canadian Agent shall be a federally-chartered
Canadian bank which has an office in Toronto, Ontario, Canada. Upon the
acceptance of any appointment as an Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as an Agent, the provisions
of this Section 11 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as an Agent.
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Section 12. MISCELLANEOUS.
12.01 NO WAIVER. No failure on the part of either Agent, any Bank or the
Issuing Bank to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under this Agreement, or any
Security Document, any Letter of Credit Document, any Note or any other
Document to which an Obligor is a party shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under
this Agreement, or any Security Document, any Letter of Credit Document, any
Note or any other Document to which an Obligor is a party preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.
12.02 NOTICES. All notices and other communications provided for herein
(including, without limitation, any waivers or consents under this Agreement)
shall be given or made by telecopy or otherwise in writing or, with respect to
notices given pursuant to Section 2.01(III) hereof, by telephone, confirmed in
writing by telecopier by the close of business on the day the notice is given
(each communication given by any of such means to be deemed to be "in writing"
for purposes of this Agreement) and telecopied, mailed or delivered (or
telephoned, as the case may be) to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof, or, as to any
party, at such other address as shall be designated by such party in a notice
to each Agent and each Obligor. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
12.03 EXPENSES; ETC. The Company agrees (a) to pay or reimburse each Agent
on demand for the out-of-pocket costs and expenses of such Agent (including,
without limitation, the reasonable fees and expenses of Messrs. Milbank, Tweed,
Hadley & McCloy, special New York counsel to the Banks and Messrs.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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Stikeman, Elliott, special Canadian counsel to the Banks), in connection with
(A) the negotiation, preparation, execution and delivery of this Agreement, the
Security Documents, the Holdings Documents, the Majority Interest Documents,
the Minority Interest Documents, the Letter of Credit Documents and the Notes
and any related agreements, instruments or documents, the making of the Loans
hereunder and the issuance of Letters of Credit hereunder and (B) any
amendment, modification or waiver of any of the terms of this Agreement, any
Security Document, any Holdings Document, any Majority Interest Document, any
Minority Interest Document, any Letter of Credit Document, any of the Notes or
such other agreements, instruments or documents and (b) to pay or reimburse
each Agent and each Bank on demand for (i) all reasonable costs and expenses of
such Agent and such Bank (including reasonable counsels' fees and expenses) in
connection with the enforcement of this Agreement, any Security Document, any
Holdings Document, any Majority Interest Document, any Minority Interest
Document, any Letter of Credit Document or any of the Notes and (ii) all
transfer, stamp, documentary, recording or other similar taxes, assessments,
fees or charges levied by any governmental or revenue authority in respect of
this Agreement, any Security Document, any Holdings Document, any Majority
Interest Document, any Minority Interest Document, any Letter of Credit
Document, any of the Notes or any other document referred to herein. The
Company hereby indemnifies each Agent, the Issuing Bank and each Bank and their
respective directors, officers, employees, agents and affiliates from, and
agrees to hold each of them harmless against, any and all losses, claims,
damages, liabilities (or actions or other proceedings commenced or threatened
in respect thereof) and reasonable expenses that arise out of or in any way
relate to or result from the making of Loans or issuance of Letters of Credit
hereunder, or the other transactions contemplated hereby or thereby or by any
other Document, including, without limitation, any investigation or litigation
or other proceedings (whether or not such indemnified person is a party to any
action or proceeding out of which any of the foregoing arise), other than any
of the foregoing to the extent incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified. Neither Agent nor any Bank
shall be responsible or liable to any Obligor or any other Person
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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for any consequential damages which may be alleged as a result of this
Agreement, any Security Document, any Holdings Document, any Majority Interest
Document, any Minority Interest Document or any Letter of Credit Document.
12.04 AMENDMENTS; ETC. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be amended or waived only by an
instrument in writing signed by each Obligor, the Agents and the Majority Banks
(and, if its rights or obligations are affected thereby, the Issuing Bank), or
by the Company and the Agents acting with the consent of the Majority Banks
(and, if its rights or obligations are affected thereby, the Issuing Bank) and
any such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
any amendment, modification or waiver shall not, unless by an instrument signed
by all of the Banks or by the Agents acting with the consent of all of the
Banks: (i) increase or extend the term of the Revolving Credit Commitments
(including, without limitation, the Series B Sublimit Amount or the Letter of
Credit Sublimit Amount), (ii) extend the date fixed for the payment of
principal of or interest on any Loan or for the payment of any Letter of Credit
Obligation, (iii) reduce the amount of any payment of principal of any Loan or
any Reimbursement Obligation or the rate at which interest is payable thereon
or any fee payable hereunder, (iv) alter the terms of this Section 12.04, (v)
release (in whole or in part) any Obligor or impair the continuing
effectiveness of any guarantee of any Guarantor or (vi) amend the definition of
the term "Majority Banks" and provided, further, that any amendment of Section
11 hereof shall require the consent of both Agents. Each Agent agrees not to
amend or waive the provisions of any Security Document, any Holdings Document,
any Minority Interest Document or any Majority Interest Document without the
consent of Majority Banks; provided that any release or substitution of
collateral under any Security Document or Supplemental Security Document, or
termination of any Supplemental Security Document or Supplemental Agreement,
(other than, in each case, in conjunction with a transaction permitted by
Section 9.13 hereof, Section 3.06 of the Holdings Supplemental Agreement or the
Override Agreement) and which requires the
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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consent of such Agent or the Banks pursuant to the terms of such Security
Document or Supplemental Security Document shall require the consent of each
Bank; and provided further that no Agent shall agree to any amendment or waiver
of the definitions of "Security" (as defined in the Pledge Agreement),
"Collateral" (as defined in the Security Agreement) or definitions having
similar purpose in any other Security Document or any Supplemental Security
Document (except in conjunction with, and to the extent required by, a release
or substitution of collateral that does not require Bank consent in accordance
with the preceding proviso) without the consent of each Bank.
12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) No Obligor may assign its rights or obligations hereunder or under its
Notes without the prior consent of all of the Banks, the Issuing Bank and the
Agents.
(b) [Intentionally omitted]
(c) A Bank may not assign any of its Loans, its Notes, its participation
in Letter of Credit Liabilities or (in the case of a U.S. Dollar Bank) its
Revolving Credit Commitment without the prior consent of the Company and the
U.S. Agent and, if the assignee Bank or the assignor Bank is a Canadian
Dollar Bank, the Canadian Agent, such consent not to be unreasonably
withheld; PROVIDED that (i) any Bank may assign to another Bank all or
(subject to clause (ii) below) any portion of its Loans, its Notes, its
participation in Letter of Credit Liabilities or (in the case of a U.S.
Dollar Bank) its Revolving Credit Commitment; (ii) any partial assignment of
Loans, Notes, participations in Letter of Credit Liabilities or (in the case
of a U.S. Dollar Bank) Revolving Credit Commitment (other than to any
affiliate or majority-owned subsidiary of the assigning Bank) shall be in the
case of the partial assignment of only Loans, Notes,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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participations in Letter of Credit Liabilities or (in the case of a U.S. Dollar
Bank) Revolving Credit Commitment, in an amount equal to U.S.$5,000,000 or
multiples of U.S.$1,000,000 in excess thereof (unless the Company and the U.S.
Agent and, if the assignee Bank or the assignor Bank is a Canadian Dollar Bank,
the Canadian Agent, otherwise consent to a lesser amount of such partial
assignment); and (iii) contemporaneously with any assignment of Revolving
Credit Commitment such assigning U.S. Dollar Bank shall also transfer to such
assignee bank the same proportion of each of its Loans then outstanding
(together with the same proportion of the Notes then outstanding) and its
participation in Letter of Credit Liabilities then outstanding. Upon notice to
the Company and the U.S. Agent and, if the assignee Bank or the assignor Bank
is a Canadian Dollar Bank, the Canadian Agent of an assignment permitted above
(which notice shall identify the assignee and the amount of the assignor's
Revolving Credit Commitment (in the case of a U.S. Dollar Bank), participations
in Letter of Credit Liabilities, Notes and Loans assigned in detail reasonably
satisfactory to the U.S. Agent) and upon the effectiveness of any assignment
consented to by the Company as required above, the assignee shall have, to the
extent of such assignment (unless otherwise provided in such assignment with
the consent of the Company and the U.S. Agent and, if the assignee Bank or the
assignor Bank is a Canadian Dollar Bank, the Canadian Agent), the obligations,
rights and benefits of a Bank hereunder holding the Revolving Credit
Commitment, Notes, participations in Letter of Credit Liabilities and Loans (or
portions thereof) assigned to it (in addition to the Revolving Credit
Commitment, Notes, participations in Letter of Credit Liabilities and Loans, if
any, theretofore held by such assignee). Upon each such assignment the assignor
Bank or the assignee Bank shall pay to the U.S. Agent an assignment fee of
$3,500.
(d) [Intentionally omitted]
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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(e) A Bank may sell to one or more other Persons a participation in all or
any part of any Loans held by it, its participation in Letter of Credit
Liabilities or its Revolving Credit Commitments, in which event each such
participant shall be entitled to the rights and benefits of the provisions of
Section 9.01(l) hereof with respect to its participation in such Loan, but
shall not have any other rights or benefits under this Agreement or any Note
(the participant's rights against such Bank in respect of such participation to
be those set forth in the agreement (the "PARTICIPATION AGREEMENT") executed by
such Bank in favor of the participant). All amounts payable by any Obligor to
any Bank under Section 5 hereof shall be determined as if such Bank had not
sold any participations. In no event shall a Bank that sells a participation
be obligated to the participant under the Participation Agreement to take or
refrain from taking any action hereunder or under such Bank's Notes except that
such Bank may agree in the Participation Agreement that it will not, without
the consent of the participant, agree to (i) the extension of any date fixed
for the payment of principal of or interest on the related Loan or Loans or for
the payment of any related Letter of Credit Obligation; (ii) the reduction of
any payment of principal of any related Loan or any related Reimbursement
Obligation; (iii) the release (in whole or in part) of any Obligor or the
impairment of the continuing effectiveness of any guarantee of any Guarantor;
(iv) the release or substitution of substantially all of the collateral under
the Security Documents and the Supplemental Security Document, or the
termination of any Supplemental Security Document or any Supplemental Agreement
which requires the consent of such Bank; or (v) the reduction of the rate at
which either interest is payable on any related Loan or any related
Reimbursement Obligation or (if the participant is entitled to any part
thereof) facility fees or letter of credit fees are payable hereunder to a
level below the rate at which the participant is entitled to receive interest
or facility fees or letter of credit fees in respect of such participation.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 274
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(f) A Bank may furnish any information concerning any Majority Interest
Party, any Minority Interest Party, Holdings, any Obligor or any of the
Subsidiaries of any thereof, in the possession of such Bank from time to time
to assignees and participants (including prospective assignees and
participants), provided that such Bank shall require that each such Person
has agreed in writing to maintain the confidentiality of any such information
which is non-public to the same extent such Bank is required to maintain such
confidentiality in accordance with Section 12.15 hereof and the
confidentiality agreement of such Bank referred to in the last sentence
of said Section.
12.07 SURVIVAL. The obligations of the Obligors under Sections
2.01(II)(f), 5.01, 5.05, 5.06 and 12.03 hereof shall survive the repayment of
the Loans, the termination or expiration of the Revolving Credit Commitments
and the expiration or termination of all Letters of Credit.
12.08 CAPTIONS. Captions, section headings and the table of contents
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
12.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
12.11 JURISDICTION AND SERVICE OF PROCESS. Any suit, action or proceeding
against any Obligor with respect to this Agreement, any Loan, any Note, any
Letter of Credit, any Letter of Credit Document or any Security Document or on
any judgment entered by any court in respect of any thereof may be brought in
the Supreme Court of the State of New York, County of New York,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 275
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in the United States District Court for the Southern District of New York, or
in the courts sitting in Toronto, Ontario, Canada or in the courts sitting in
the Federal District of Mexico, or in the courts sitting in any jurisdiction
where property covered by any Mortgage may be situated, as the U.S. Agent may
elect in its sole discretion and each Obligor hereby submits to the
non-exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding (and waives for such purpose any other preferential
jurisdiction by reason of its present or future domicile or otherwise). Each
of PSC and PSM hereby agrees that service of all writs, process and summonses
in any such suit, action or proceeding brought in the State of New York may be
made upon CT Corporation System (the "PROCESS AGENT"), presently located at
1633 Broadway, New York, New York 10019, and each of PSC and PSM hereby
irrevocably appoints the Process Agent its true and lawful attorney-in-fact in
its name, place and stead to accept such service of any and all such writs,
process and summonses, and agrees that the failure of the Process Agent to give
any notice of any such service of process to it shall not impair or affect the
validity of such service or of any judgment based thereon. Each Obligor hereby
further irrevocably consents to the service of process in any suit, action or
proceeding in said courts by the mailing thereof by either Agent by registered
or certified mail, postage prepaid, to such Obligor. Nothing herein shall in
any way be deemed to limit the ability of either Agent to serve any such writs,
process or summonses in any other manner permitted by applicable law or to
obtain jurisdiction over any Obligor in such other jurisdictions, and in such
manner, as may be permitted by applicable law. Each Obligor hereby irrevocably
waives any objection which it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in the Supreme Court of
the State of New York, County of New York, or the United States District Court
for the Southern District of New York, and hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
12.12 WAIVER OF SOVEREIGN IMMUNITY. To the extent that any Obligor may now
or hereafter be entitled, in any jurisdiction in which judicial proceedings may
at any time be
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 276
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commenced with respect to this Agreement, the Loans, the Notes, the Letters of
Credit, the Letter of Credit Documents or the Security Documents to claim for
itself or its revenues or assets any immunity from suit, court jurisdiction,
attachment prior to judgment, attachment in aid of execution of a judgment,
execution of a judgment or any other legal process or remedy with respect to
its respective obligations hereunder or thereunder, and to the extent that in
any such jurisdiction there may be attributed to such Obligor such an immunity
(whether or not claimed), such Obligor hereby irrevocably agrees not to claim
and hereby irrevocably waives such immunity.
12.13 JUDGMENT CURRENCY. This is an international loan transaction in
which (a) in the case of U.S. Dollar Loans and Letter of Credit Obligations,
the specification of U.S. Dollars and payment in New York, New York, U.S.A. is
of the essence, and, with respect to such U.S. Dollar Loans and Letter of
Credit Obligations, U.S. Dollars shall be the currency of account in all events
and (b) in the case of Canadian Dollar Loans, the specification of Canadian
Dollars and payment in Toronto, Ontario, Canada is of the essence, and with
respect to such Canadian Dollar Loans, Canadian Dollars shall be the currency
of account in all events. The payment obligations of the Obligors with respect
to any Loans or Letter of Credit Obligations under this Agreement or amounts
payable under the Security Documents and the Notes shall not be discharged by
an amount paid in a currency other than U.S. Dollars, in the case of U.S.
Dollar obligations, or Canadian Dollars, in the case of Canadian Dollar
obligations (each such currency with respect to each such obligation, the
"REQUIRED CURRENCY"), or in a place other than New York, New York, U.S.A. in
the case of U.S. Dollar obligations or Toronto, Ontario, Canada in the case of
Canadian Dollar obligations (each such place with respect to each obligation,
the "REQUIRED PLACE"), whether pursuant to such judgment or otherwise to the
extent that the amount so paid on conversion to the Required Currency and
transfer to the Required Place under normal banking procedures does not yield
the amount of the Required Currency in the Required Place due hereunder.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 277
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12.14 ACKNOWLEDGMENT OF LEGAL EXISTENCE. Each Obligor hereby expressly
acknowledges the legal existence of each Agent, the Issuing Bank and each Bank,
as well as its legal capacity to enter into this Agreement, each Security
Document to which it is a party and each other Document to which it is a party,
and hereby also expressly acknowledges the authority of the person who signs
this Agreement, each Security Document to which it is a party and each other
Document to which it is a party on behalf of such Agent or such Bank, such
person's name appearing on the signature pages hereof or thereof.
12.15 CONFIDENTIALITY. Each Bank and each Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with customary procedures for handling confidential information of
this nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement
which is identified by the Company as being confidential at the time the same
is delivered to the Banks or either Agent, provided that nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process; (ii) to counsel for any of the
Banks or the Agent; (iii) to bank examiners, auditors or accountants; (iv) to
either Agent or any other Bank; (v) in connection with any litigation to which
any one or more of the Banks or either Agent is a party; or (vi) to any
assignee or participant (or prospective assignee or participant) so long as
such assignee or participant (or prospective assignee or participant) first
executes and delivers to the respective Bank a confidentiality agreement having
substantially the same scope as this Section 12.15 and, with respect to
confidential information covered thereby, the confidentiality agreement
referred to in the last sentence of this Section 12.15; and provided finally
that in no event shall any Bank or either Agent be obligated or required to
return any materials furnished by the Company. The obligations of each Bank
whose name appears on the signature pages hereof under this Section 12.15 shall
supplement (and shall not supersede and replace) the obligations of such Bank
under the confidentiality
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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letter entitled "Hamilton Beach Confidentiality Agreement" in respect of this
financing signed and delivered by such Bank to Chase prior to the date hereof
(and, in the case of Chase, the confidentiality letter in respect of this
financing signed and delivered by Chase to NACCO on August 22, 1990) with
respect to the confidential information covered thereby.
12.16 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OBLIGOR, EACH AGENT, THE ISSUING BANK AND THE BANKS HEREBY IRREVOCABLY
WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENT TO
WHICH IT IS A PARTY OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
12.17 CONFIRMATION AND AGREEMENT. Each of the Obligors hereby (a) agrees
that each reference to the Credit Agreement dated as of October 11, 1990 among
the Obligors, the banks signatory thereto and the Agents and words of similar
import in each Document to which such Obligors are
party shall be a reference to such agreement as amended and restated hereby and
(b) confirms its obligations under each Document to which it is party after
giving effect to the amendment and restatement of the Original Credit Agreement
provided for by this Agreement.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 279
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The parties hereto have caused this Agreement to be duly executed as of the
day and year first above written.
OBLIGORS
--------
HAMILTON BEACH/PROCTOR-SILEX, INC.
By James H. Taylor
----------------------------------------
Title: Vice President and Treasurer
Hamilton Beach/Proctor-Silex, Inc.
4421 Waterfront Drive
Glen Allen, Virginia 23060
Telecopier No.: (804) 527-7357
Telephone No.: (804) 527-7190
Attention: James H. Taylor
Vice President
and Treasurer
With a copy to:
NACCO Industries, Inc.
12800 Shaker Boulevard
Cleveland, Ohio 44120
Telex No.: 810-421-8569
Telecopier No.: (216) 449-9561
Telephone No.: (216) 449-9690
Attention: Charles A. Bittenbender
Vice President,
General Counsel
and Secretary
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 280
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Telecopier No.: (216) 449-9607
Telephone No.: (216) 449-9660
Attention: R. Robertson Hiltopn
Vice President and
Treasurer
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 281
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PROCTOR-SILEX CANADA INC.
By John Wright
---------------------------------
Title: Controller
PROCTOR-SILEX CANADA INC.
10 Milner Business Court
Suite 600
Scarborough, Ontario
Canada MIB 3C6
Telecopier No.: (416) 292-8361
Telephone No.: (416) 292-7699
Attention: John Wright
Controller
With a copy to:
Hamilton Beach/Proctor-Silex, Inc.
4421 Waterfront Drive
Glen Allen, Virginia 23060
Telecopier No.: (804) 527-7357
Telephone No.: (804) 527-7190
Attention: James H. Taylor
Vice President and
Treasurer
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 282
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PROCTOR-SILEX S.A. DE C.V.
By Joseph Lamcambra
--------------------------------------------
Title: General Manager
Proctor-Silex, S.A. de C.V.
c/o Hamilton Beach/Proctor-Silex, Inc.
12035-G Rojas Drive
El Paso, Texas 79936
Telecopier No.: (915) 778-0263
Telephone No.: (915) 774-7501
Attention: Joseph Lacambra
General Manager
With a copy to:
Hamilton Beach/Proctor-Silex, Inc.
4421 Waterfront Drive
Glen Allen, Virginia 23060
Telecopier No.: (804) 527-7357
Telephone No.: (804) 527-7190
Attention: James H. Taylor
Vice President and
Treasurer
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 283
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BANKS
-----
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By Carol A. Ulmer
--------------------------------
Title: Vice President
Address for Notices:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Telecopier No.: (212) 552-7075
Telephone No.: (212) 552-4112
Attention: Carol A. Ulmer
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 284
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THE CHASE MANHATTAN BANK OF CANADA
By Tim Wilson
--------------------------------------
Title: Vice President
Address for Notices:
The Chase Manhattan Bank
of Canada
150 King Street West
16th Floor
Toronto, Ontario M5H 1J9 Canada
Telecopier No.: (416) 585-3370
Telephone No.: (416) 585-3367
Attention: Tim Wilson
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 285
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THE FIRST NATIONAL BANK OF CHICAGO
By Marguerite C. Canestraro
--------------------------------------
Title: Authorized Agent
Address for Notices:
The First National Bank of Chicago
One First National Plaza
Suite 0634
Chicago, Illinois 60670
Telecopier No.: (312) 732-4840
Telephone No.: (312) 732-7659
Attention: Ernest M. Misiora
with a copy to
First Chicago Bank
1301 E. 9th Street
Suite 2150
Cleveland, Ohio 44114
Telecopier No.: (216) 574-9278
Telephone No.: (216) 574-9845
Attention: Marguerite C. Canestraro
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 286
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THE BANK OF NOVA SCOTIA
By A. S. Norsworthy
---------------------------------
Title: Assistant Agent
Address for Notices:
The Bank of Nova Scotia
Suite 2400
600 Peachtree Street, NE
Atlanta, Georgia 30308
Telecopier No.: (404) 888-8998
Telephone No.: (404) 877-1562
Attention: Joe Legisto
with a copy to:
The Bank of Nova Scotia
181 West Madison Street
Suite 3700
Chicago, Illinois 60602
Telecopier No.: (312) 201-4108
Telephone No.: (312) 201-4179
Attention: Keith Neibrugge
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 287
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BANK OF AMERICA ILLINOIS
(formerly known as
Continental Bank N.A.)
By Peter Thursby
----------------------------------
Title: Vice President
Address for Notices:
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Telecopier No.: (312) 987-0303
Telephone No.: (312) 828-6560
Attention: Carl Jordan
Peter Thursby
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 288
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CAISSE NATIONALE DE CREDIT AGRICOLE
By Karen Coons
------------------------------------
Title:
Address for Notices:
Caisse Nationale de Credit Agricole
55 E. Monroe Street
Suite 4700
Chicago, Illinois 60603
Telecopier No.: (312) 372-3724
Telephone No.: (312) 917-7570
Attention: Karen Coons
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 289
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CRESTAR BANK
By Christopher B. Werner
--------------------------------
Title: Vice President
Address for Notices:
Crestar Bank
919 East Main Street
Richmond, Virginia 23219
Telecopier No.: (804) 782-7324
Telephone No.: (804) 782-5998
Attention:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 290
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SOCIETY NATIONAL BANK
By Marianne Meal
--------------------------------------
Title: Assistant Vice President
Address for Notices:
Society National Bank
127 Public Square, 6th Floor
Cleveland, Ohio 44114-1306
Telecopier No.: (216) 689-4981
Telephone No.: (216) 689-4445
Attention: J. Roderick MacDonald
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 291
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AGENTS
------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as U.S. Agent
By Carol A. Ulmer
--------------
Title: Vice President
Address for Notices to
Chase as Agent:
New York Agency Office
The Chase Manhattan Bank
(National Association)
4 Chase Metrotech Center
13th Floor
Brooklyn, New York 11245
Telecopier No.: (718) 242-6909 or
6910
Telephone No.: (718) 242-7978
Attention: Wendy Taylor
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 292
- 184 -
THE CHASE MANHATTAN BANK
OF CANADA, as Canadian Agent
By Tim Wilson
-----------------------------------
Title: Vice President
Address for Notices to
Chase Canada as Agent:
Canadian Agency
The Chase Manhattan Bank
of Canada
150 King Street West
16th Floor
Toronto, Ontario M5H 1J9, Canada
Telecopier No.: (416) 585-3370
Telephone No.: (416) 585-3367
Attention: Tim Wilson
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE> 293
EXHIBIT 10(cxvi)
CREDIT AGREEMENT
Credit agreement, effective as of the ___ day of May, 1995, between THE
KITCHEN COLLECTION, INC., a Delaware corporation, (hereinafter sometimes called
the "Borrower") and SOCIETY NATIONAL BANK, a national banking association
(hereinafter sometimes called the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower and Bank desire to contract for the establishment
of a credit in the aggregate principal amount of Five Million Dollars
($5,000,00) to be made available to the Borrower upon the terms and subject to
the conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
-----------
As used in this credit agreement, the following terms shall have the
following meanings:
"ADJUSTED LIBOR" shall mean a rate per annum equal to the quotient
obtained (rounded upwards, if necessary, to the nearest 1/100th of 1%) by
dividing (i) the applicable LIBOR rate by (ii) 1.00 minus the Reserve
Percentage.
"CLEVELAND BANKING DAY" shall mean a day on which the main office of
Bank is open for the transaction of business.
"COMMITMENT" shall mean the obligation hereunder of Bank to make loans
up to an aggregate principal amount of Five Million Dollars ($5,000,000) during
the Commitment Period (or such lesser amount as shall be determined pursuant to
Section 2.5 hereof).
"COMMITMENT PERIOD" shall mean the period from the date hereof to May
31, 1998.
"CONTROLLED GROUP" shall mean a controlled group of corporations as
defined in Section 1563 of the Internal Revenue Code of 1986, as may be amended
from time to time, of which Borrower is a part.
"DEBT" means, collectively, all liabilities now owing or hereafter
incurred by Borrower to Bank and includes (without limitation) every such
liability whether owing absolutely or contingently, whether created by loan,
overdraft, guaranty of payment or other contract or by quasi-contract, tort,
statute or other operation of law, whether incurred directly to Bank or
acquired by Bank by purchase, pledge or otherwise, and whether participated to
or from Bank in whole or in part;
<PAGE> 294
"ENVIRONMENTAL LAWS" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the
government of the United States of America or by any state or municipality
thereof or by any court, agency, instrumentality, regulatory authority or
commission of any of the foregoing concerning health, safety and protection of,
or regulation of the discharge of substances into, the environment.
"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.
"FUNDED INDEBTEDNESS" means indebtedness which (including any renewal
or extension in whole or in part) matures or remains unpaid more than twelve
(12) months after the date on which originally incurred;
"INTEREST ADJUSTMENT DATE" shall mean the last day of each Interest
Period.
"INTEREST COVERAGE RATIO" means the ratio between (a) the sum of Net
Pre-Tax earnings plus the net aggregate of all interest paid or accrued, for
the relevant ratio period (consisting of the most recent four (4) consecutive
fiscal quarter-annual periods then ended), on all indebtedness for borrowed
money owed by Borrower and (b) the net aggregate of all interest paid and
accrued, for the relevant ratio period (consisting of the most recent four (4)
consecutive fiscal quarter-annual periods then ended), on all indebtedness for
borrowed money owed by Borrower;
"INTEREST PERIOD" means a period of one, two or three months (as
selected by Borrower) commencing on the initial date of the LIBOR Loan and on
each Interest Adjustment Date with respect thereto; provided, however, that if
such period would extend beyond the maturity of this Note, such period shall be
shortened to end on such date, and no Interest Period shall extend beyond the
due date of any principal installment of this Note. If Borrower fails to
select a new Interest Period with respect to the outstanding LIBOR Loan at
least three (3) London Banking Days prior to any Interest Adjustment Date,
Borrower shall be deemed to have selected a Prime Rate Loan;
"LIBOR" shall mean the average (rounded upward to the nearest 1/16th of
1%) of the per annum rates at which deposits in immediately available funds in
United States dollars for the relevant Interest Period and in the amount of the
LIBOR Loan to be disbursed or to remain outstanding during such Interest
Period, as the case may be, are offered to the Reference Bank by prime banks in
any Eurodollar market reasonably selected by the Reference Bank, determined as
of 11:00 a.m. London time (or as soon thereafter as practicable), two (2)
London banking days prior to the beginning of the relevant Interest Period
pertaining to a LIBOR Loan hereunder.
"LIBOR LOANS" shall mean those loans described in Section 2.1A hereof
on which the Borrower shall pay interest at a rate based on LIBOR.
<PAGE> 295
"LIBOR MARGIN" means the applicable number of basis points ("bp")
determined by reference to the following chart:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INTEREST COVERAGE RATIO*
----------------------- Equal to or greater
and Equal to 3.00 to 1.00 than 5.00 to 1.00, but
LEVERAGE RATIO* but no greater than no greater than 6.99 to Equal to or greater
-------------- 4.99 to 1.00 1.00 than 7.00 to 1.00
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equal to or less than .35 to
1.00 67.5 bp 67.5 bp 42.5 bp
- -------------------------------------------------------------------------------------------------------------
Greater than .35 to 1.00 but
less than or equal to .39 to
1.00 100 bp 67.5 bp 67.5 bp
- -------------------------------------------------------------------------------------------------------------
Greater than .39 to 1.00 but
less than or equal to .42 to
1.00 100 bp 100 bp 67.5 bp
- -------------------------------------------------------------------------------------------------------------
Greater than .42 to
1.00 125 bp 100 bp 100 bp
- -------------------------------------------------------------------------------------------------------------
<FN>
* The Leverage Ratio and Interest Coverage Ratio are based upon Borrower's financial statements received by Bank for the most
recent fiscal quarter-annual period and the previous three (3) fiscal quarter-annual periods. If Borrower fails to furnish the
aforesaid financial statements to Bank or if none of the aforesaid parameters apply, the LIBOR Margin shall be ____%.
</TABLE>
"LONDON BANKING DAY" shall mean a day on which banks are open for
business in London, England, and quoting deposit rates for dollar deposits.
"NACCO" means NACCO Industries, Inc., a Delaware corporation;
"NET PRE-TAX EARNINGS" means the earnings (or losses) experienced by
Borrower and its Subsidiaries calculated before taxes, as determined in
accordance with generally accepted accounting principles; provided, that any
extraordinary gains (or losses), as determined in accordance with generally
accepted accounting principles, shall not be taken into account for purposes of
this definition;
"NET WORTH" means (a) the excess of the net book value (after deducting
all applicable reserves and deducting any value attributable to the reappraisal
or writeup of any asset) of Borrower's assets over all its liabilities, as
determined on an accrual basis and in accordance with generally accepted
accounting principles not inconsistent with its present accounting
<PAGE> 296
procedures, less (b) the aggregate amount of all loans and advances made by
Borrower to NACCO or any subsidiary of NACCO or any affiliate of any such
entity which are outstanding for more than one hundred fifty (150) consecutive
days;
"NOTE" shall mean the revolving credit note executed and delivered
pursuant to Section 2.1A hereof.
"PARENT" shall mean Housewares Holding Company, a Delaware corporation.
"PLAN" shall mean any employee pension benefit plan subject to Title IV
of the Employee Retirement Income Security Act of 1974, as amended, established
or maintained by Borrower, any Subsidiary, or any member of the Controlled
Group, or any such Plan to which Borrower, any Subsidiary, or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"POSSIBLE DEFAULT" shall mean an event, condition or thing which
constitutes, or which with the lapse of any applicable grace period or the
giving of notice or both would constitute, any event of default referred to in
Article VII hereof and which has not been appropriately waived by Bank in
writing or fully corrected prior to becoming an actual event of default.
"PRIME RATE" shall mean the interest rate established by Bank as Bank's
Prime Rate, whether or not such rate is publicly announced; the Prime Rate may
not be the lowest interest rate charged by Bank for commercial or other
extensions of credit.
"PRIME RATE LOANS" shall mean those loans described in Section 2.1A
hereof on which the Borrower shall pay interest at a rate based on the Prime
Rate.
"REFERENCE BANK" shall mean the Cayman Islands branch office of Society
National Bank.
"RELATED WRITING" shall mean the Note and any assignment, mortgage,
security agreement, guaranty agreement, subordination agreement, financial
statement, audit report or other writing furnished by Borrower or any of its
officers to Bank pursuant to or otherwise in connection with this credit
agreement.
"REPORTABLE EVENT" shall mean a reportable event as that term is defined
in Title IV of the Employee Retirement Income Security Act of 1974, as amended,
except actions of general applicability by the Secretary of Labor under Section
110 of such act.
"RESERVE PERCENTAGE" shall mean for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, all basic,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements) for
a member bank of the Federal Reserve System in Cleveland, Ohio, in respect of
<PAGE> 297
"Eurocurrency Liabilities". The Adjusted LIBOR shall be adjusted automatically
on and as of the effective date of any change in the Reserve Percentage.
"SUBORDINATED" as applied to indebtedness, shall mean that the
indebtedness has been subordinated (by written terms or agreement being in form
and substance satisfactory to Bank) in favor of the prior payment in full of
Borrower's Debt to Bank.
"SUBSIDIARY" shall mean an existing or future corporation, the majority
of the outstanding capital stock or voting power, or both, of which is (or upon
the exercise of all outstanding warrants, options and other rights would be)
owned at the time in question by Borrower or by another such corporation or by
any combination of Borrower and such corporations.
Any accounting term not covered by a specific definition in this Article
I shall have the meaning ascribed thereto in accordance with generally accepted
accounting principles not inconsistent with Borrower's present accounting
procedures.
The foregoing definitions shall be applicable to the singulars and
plurals of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
--------------------------
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and
provisions of this credit agreement Bank shall grant loans to the Borrower in
such aggregate amount as the Borrower shall request; provided, however, that in
no event shall the aggregate principal amount of all loans outstanding under
this credit agreement during the Commitment Period be in excess of Five Million
Dollars ($5,000,000).
The aforementioned loans may be made as a revolving credit, as follows:
Revolving Credit. Subject to the terms and conditions of this credit
agreement, during the Commitment Period Bank will make a loan or loans to the
Borrower in such amount or amounts as the Borrower may from time to time request
but not exceeding in aggregate principal amount at any one time outstanding
hereunder the Commitment of Bank. The Borrower shall have the option, subject
to the terms and conditions set forth herein, to borrow hereunder up to the
Commitment by means of any combination of (i) Prime Rate Loans maturing
_________________, drawn down in aggregate amounts of not less than
____________________ Dollars ($_______) or any multiple thereof, bearing
interest at a rate per annum which shall be the Prime Rate or (ii) LIBOR Loans
maturing in one, two or three months, drawn down in aggregate amounts of not
less than _____________________ Dollars ($______) or any multiple thereof,
bearing interest at if LIBOR Margin for the first day of the applicable Interest
Period plus Adjusted LIBOR. The Borrower shall pay interest (based on a year
having 365 or 366 days, as the case may be, and calculated for the actual number
of days elapsed) on the unpaid principal amount of Prime Rate Loans outstanding
from time to time
<PAGE> 298
from the date thereof until paid, payable on January 15th, April 15th, July
15th and October 15th, of each year commencing on the first such date from the
date of this Agreement, at a rate per annum which shall be the Prime Rate from
time to time in effect. Any change in such Prime Rate shall be effective
immediately from and after such change in the Prime Rate. The Borrower shall
pay interest (based on a year having 360 days and calculated for the actual
number of days elapsed) at a fixed rate for each Interest Period on the unpaid
principal amount of LIBOR Loans outstanding from time to time from the date
thereof until paid, payable on each Interest Adjustment Date with respect to an
Interest Period at the rate equal to the sum of the LIBOR Margin for the first
day of such Interest Period plus Adjusted LIBOR, fixed in advance of each
Interest Period as herein provided for each such Interest Period. Subject to
Section 2.1B hereof, at the request of the Borrower, the Bank shall convert
Prime Rate Loans to LIBOR Loans at any time and shall convert LIBOR Loans to
Prime Rate Loans on any Interest Adjustment Date applicable to the LIBOR Loan.
The obligation of the Borrower to repay both the Prime Rate Loans and the LIBOR
Loans made by Bank and to pay interest thereon shall be evidenced by the Note
of the Borrower substantially in the form of Exhibit A hereto, with appropriate
insertions, dated the date of this credit agreement and payable to the order of
Bank on May 31, 1998, in the principal amount of the Commitment, or, if less,
the aggregate unpaid principal amount of revolving credit loans made hereunder
by Bank. The principal amount of the Prime Rate Loans and the LIBOR Loans made
by Bank and all prepayments thereof and the applicable dates with respect
thereto shall be recorded by Bank from time to time on the records of the Bank
by such method as Bank may generally employ; provided, however, that failure to
make any such entry shall in no way detract from Borrower's obligations under
such Note. The aggregate unpaid amount of Prime Rate Loans and LIBOR Loans set
forth on the records of the Bank shall be rebuttably presumptive evidence of
the principal amount owing and unpaid on such Note. If the Note shall not be
paid at maturity, whether such maturity occurs by reason of lapse of time or by
operation of any provision of acceleration of maturity therein contained, the
principal thereof and the unpaid interest thereon shall bear interest, until
paid, for Prime Rate Loans at a rate per annum which shall be two per cent (2%)
in excess of the Prime Rate from time to time in effect and for LIBOR Loans at
a rate per annum two per cent (2%) in excess of sum of the LIBOR Margin for the
first day of the applicable Interest Period plus Adjusted LIBOR for the
relevant Interest Period. Subject to the provisions of this credit agreement,
the Borrower shall be entitled under this paragraph to borrow funds, repay the
same in whole or in part and reborrow hereunder at any time and from time to
time.
SECTION 2.2. CONDITIONS TO LOANS. The obligation of Bank to make the
loans hereunder is conditioned, in the case of each borrowing hereunder, upon
(i) receipt by the Bank of one (1) Banking Day's notice from the Borrower of the
proposed date and aggregate amount of the borrowing of any Prime Rate Loans and
two (2) London banking days' notice from the Borrower of the proposed date,
aggregate amount and initial Interest Period of any LIBOR Loans; (ii) the fact
that no Possible Default shall then exist or immediately after the loan would
exist; and (iii) the fact that the representations and warranties contained in
Article VI hereof shall be true and correct in all material respects with the
same force and effect as if made on and as of the date of such borrowing except
to the extent that any thereof expressly relate to an earlier date. Each
borrowing by the Borrower hereunder
<PAGE> 299
shall be deemed to be a representation and warranty by the Borrower as of the
date of such borrowing as to the facts specified in (ii) and (iii) above.
SECTION 2.3. PAYMENT ON NOTE, ETC. All payments of principal, interest
and commitment fees shall be made to Bank in immediately available funds.
Whenever any payment to be made hereunder, including without limitation any
payment to be made on the Note, shall be stated to be due on a day which is not
a Banking Day, such payment shall be made on the next succeeding Banking Day and
such extension of time shall in each case be included in the computation of the
interest payable on the Note; provided, however, that with respect to any LIBOR
Loan, if the next succeeding Banking Day falls in the succeeding calendar month,
such payment shall be made on the preceding Banking Day and the relevant
Interest Period shall be adjusted accordingly.
SECTION 2.4. PREPAYMENT. The Borrower shall have the right at any time
or from time to time, upon two (2) Banking Days' prior written notice to Bank in
the case of Prime Rate Loans, without the payment of any premium or penalty, or
four (4) London banking days' prior written notice in the case of LIBOR Loans
(subject to the payment of a prepayment penalty as hereinafter described in this
Section 2.4), to prepay all or any part of the principal amount of the Note then
outstanding as designated by the Borrower, plus interest accrued on the amount
so prepaid to the date of such prepayment. In any case of prepayment of any
LIBOR Loans, the Borrower agrees that if Adjusted LIBOR as determined as of
11:00 a.m. London time two London banking days prior to the date of prepayment
of any LIBOR Loans (hereinafter, "Prepayment LIBOR") shall be lower than the
last Adjusted LIBOR previously determined for those LIBOR Loans with respect to
which prepayment is intended to be made (hereinafter, "Last LIBOR"), then the
Borrower shall, upon written notice by Bank, promptly pay to Bank in immediately
available funds, a prepayment penalty measured by a rate (the "Prepayment
Penalty Rate") which shall be equal to the difference between the Last LIBOR and
the Prepayment LIBOR. In determining the Prepayment LIBOR, Bank shall apply a
rate equal to Adjusted LIBOR for a deposit approximately equal to the amount of
such prepayment which would be applicable to an Interest Period commencing on
the date of such prepayment and having a duration as nearly equal as practicable
to the remaining duration of the actual Interest Period during which such
prepayment is to be made. The Prepayment Penalty Rate shall be applied to all
or such part of the principal amounts of the Note as related to the LIBOR Loans
to be prepaid, and the prepayment penalty shall be computed for the period
commencing with the date on which such prepayment is to be made to that date
which coincides with the last day of the Interest Period previously established
when the LIBOR Loans, which are to be prepaid, were made. Each prepayment of a
LIBOR Loan shall be in the aggregate principal sum of not less than
_______________________ Dollars ($_______). In the event the Borrower cancels a
proposed LIBOR Loan subsequent to the delivery to Bank of the proposed date,
aggregate amount and initial Interest Period of such loan, but prior to the draw
down of funds thereunder, such cancellation shall be treated as a prepayment
subject to the aforementioned prepayment penalty.
SECTION 2.5. FEES. Borrower agrees to pay to Bank as a consideration
for its Commitment hereunder, (i) an annual facility fee equal to 20 basis
points (one fifth of one
<PAGE> 300
percent (1/5%)) based on a year having 360 days and calculated for the actual
number of days elapsed, on the Bank's Commitment hereunder, payable on the
_____ day of May, 1995 and annually on the same day of each year thereafter
during the term hereof, and (ii) A Closing Fee equal to $10,000 payable on the
closing date of the transaction evidenced by this credit agreement.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS
---------------------------------------------
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If at any time any
law, treaty or regulation (including, without limitation, Regulation D of the
Board of Governors of the Federal Reserve System) or the interpretation thereof
by any governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority shall impose (whether
or not having the force of law), modify or deem applicable any reserve and/or
special deposit requirement (other than reserves included in the Reserve
Percentage, the effect of which is reflected in the interest rate(s) of the
LIBOR Loan(s) in question) against assets held by, or deposits in or for the
amount of any loans by, Bank, and the result of the foregoing is to increase the
cost (whether by incurring a cost or adding to a cost) to Bank of making or
maintaining hereunder LIBOR Loans or to reduce the amount of principal or
interest received by Bank with respect to such LIBOR Loans, then upon demand by
Bank the Borrower shall pay to Bank from time to time on Interest Adjustment
Dates with respect to such loans, as additional consideration hereunder,
additional amounts sufficient to fully compensate and indemnify Bank for such
increased cost or reduced amount, assuming (which assumption Bank need not
corroborate) such additional cost or reduced amount were allocable to such LIBOR
Loans. A certificate as to the increased cost or reduced amount as a result of
any event mentioned in this Section 3.1, setting forth the calculations
therefor, shall be promptly submitted by Bank to the Borrower and shall, in the
absence of manifest error, be conclusive and binding as to the amount thereof.
Notwithstanding any other provision of this credit agreement, after any such
demand for compensation by Bank, Borrower, upon at least three (3) Banking Days'
prior written notice to Bank, may prepay the affected LIBOR Loans in full or
convert all LIBOR Loans to Prime Rate Loans regardless of the Interest Period of
any thereof. Any such prepayment or conversion shall be subject to the
prepayment penalties set forth in Section 2.4 hereof. Bank will notify Borrower
as promptly as practicable of the existence of any event which will likely
require the payment by Borrower of any such additional amount under this
Section.
SECTION 3.2. TAX LAW, ETC. In the event that by reason of any law,
regulation or requirement or in the interpretation thereof by an official
authority, or the imposition of any requirement of any central bank whether or
not having the force of law, Bank shall, with respect to this credit agreement
or any transaction under this credit agreement, be subjected to any tax, levy,
impost, charge, fee, duty, deduction or withholding of any kind whatsoever
(other than any tax imposed upon the total net income of Bank), and if any such
measures or any other similar measure shall result in an increase in the cost to
Bank of making or maintaining any LIBOR Loan or in a reduction in the amount of
principal, interest or commitment fee receivable by Bank in respect thereof,
then Bank shall promptly notify the
<PAGE> 301
Borrower stating the reasons therefor. The Borrower shall thereafter pay to
Bank upon demand from time to time on Interest Adjustment Dates with respect to
such LIBOR Loans, as additional consideration hereunder, such additional
amounts as will fully compensate Bank for such increased cost or reduced
amount. A certificate as to any such increased cost or reduced amount, setting
forth the calculations therefor, shall be submitted by Bank to the Borrower and
shall, in the absence of manifest error, be conclusive and binding as to the
amount thereof.
If Bank receives such additional consideration from the Borrower
pursuant to this Section 3.2, Bank shall use its best efforts to obtain the
benefits of any refund, deduction or credit for any taxes or other amounts on
account of which such additional consideration has been paid and shall reimburse
the Borrower to the extent, but only to the extent, that Bank shall receive a
refund of such taxes or other amounts together with any interest thereon or an
effective net reduction in taxes or other governmental charges (including any
taxes imposed on or measured by the total net income of Bank) of the United
States or any state or subdivision thereof by virtue of any such deduction or
credit, after first giving effect to all other deductions and credits otherwise
available to Bank. If, at the time any audit of Bank's income tax return is
completed, Bank determines, based on such audit, that it was not entitled to the
full amount of any refund reimbursed to the Borrower as aforesaid or that its
net income taxes are not reduced by a credit or deduction for the full amount of
taxes reimbursed to the Borrower as aforesaid, the Borrower, upon demand of
Bank, will promptly pay to Bank the amount so refunded to which Bank was not so
entitled, or the amount by which the net income taxes of Bank were not so
reduced, as the case may be.
Notwithstanding any other provision of this credit agreement, after any
such demand for compensation by Bank, Borrower, upon at least three (3) Banking
Days' prior written notice to Bank, may prepay the affected LIBOR Loans in full
or convert all LIBOR Loans to Prime Rate Loans regardless of the Interest Period
of any thereof. Any such prepayment or conversion shall be subject to the
prepayment penalties set forth in Section 2.4 hereof.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In respect of any LIBOR Loans, in the event that Bank shall
have determined that dollar deposits of the relevant amount for the relevant
Interest Period for such LIBOR Loans are not available to the Reference Bank in
the applicable Eurodollar market or that, by reason of circumstances affecting
such market, adequate and reasonable means do not exist for ascertaining the
LIBOR rate applicable to such Interest Period, as the case may be, Bank shall
promptly give notice of such determination to the Borrower and (i) any notice of
new LIBOR Loans previously given by the Borrower and not yet borrowed shall be
deemed a notice to make Prime Rate Loans, and (ii) the Borrower shall be
obligated either to prepay or to convert any outstanding LIBOR Loans on the last
day of the then current Interest Period or Periods with respect thereto.
SECTION 3.4. INDEMNITY. Without prejudice to any other provisions of
this Article III, the Borrower hereby agrees to indemnify Bank against any loss
or expense which Bank may sustain or incur as a consequence of any default by
the Borrower in payment when due of any amount due hereunder in respect of any
LIBOR Loan, including, but not limited to,
<PAGE> 302
any loss of profit, premium or penalty incurred by Bank in respect of funds
borrowed by it for the purpose of making or maintaining such LIBOR Loan, as
determined by Bank in the exercise of its sole but reasonable discretion. A
certificate as to any such loss or expense shall be promptly submitted by Bank
to the Borrower and shall, in the absence of manifest error, be conclusive and
binding as to the amount thereof.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any
time any new law, treaty or regulation, or any change in any existing law,
treaty or regulation, or any interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof, shall make it
unlawful for Bank to fund any LIBOR Loans which it is committed to make
hereunder with moneys obtained in the Eurodollar market, the Commitment of Bank
to fund LIBOR Loans shall, upon the happening of such event forthwith be
suspended for the duration of such illegality, and Bank shall by written notice
to the Borrower declare that its Commitment with respect to such Loans has been
so suspended and, if and when such illegality ceases to exist, such suspension
shall cease and Bank shall similarly notify the Borrower. If any such change
shall make it unlawful for Bank to continue in effect the funding in the
applicable Eurodollar market of any LIBOR Loan previously made by it hereunder,
Bank shall, upon the happening of such event, notify the Borrower thereof in
writing stating the reasons therefor, and the Borrower shall, on the earlier of
(i) the last day of the then current Interest Period or (ii) if required by such
law, regulation or interpretation, on such date as shall be specified in such
notice, either convert all LIBOR Loans to Prime Rate Loans or prepay all LIBOR
Loans to Bank in full. Any such prepayment or conversion shall be subject to
the prepayment penalties prescribed in Section 2.4 hereof.
SECTION 3.6. FUNDING. Bank may, but shall not be required to, make
LIBOR Loans hereunder with funds obtained outside the United States.
ARTICLE IV. OPENING COVENANTS
-----------------
Prior to or concurrently with the execution and delivery of this credit
agreement, Borrower shall furnish to Bank the following:
SECTION 4.1. RESOLUTIONS. Certified copies of the resolutions of the
board of directors of Borrower evidencing approval of the execution of this
credit agreement and the execution and delivery of the Note as provided for
herein.
SECTION 4.2. LEGAL OPINION. A favorable opinion of counsel for
Borrower as to the matters referred to in Sections 6.1, 6.2, 6.3 and 6.4 of this
credit agreement and such other matters as Bank may reasonably request.
SECTION 4.3. CERTIFICATE OF INCUMBENCY. A certificate of the secretary
or assistant secretary of Borrower certifying the names of the officers of
Borrower authorized to sign this credit agreement, and the Note, together with
the true signatures of such officers.
<PAGE> 303
ARTICLE V. COVENANTS
---------
Borrower agrees that so long as the Commitment remains in effect and
thereafter until the principal of and interest on the Note and all other
payments due hereunder shall have been paid in full, Borrower will perform and
observe all of the following provisions, namely:
SECTION 5.1. INSURANCE. Borrower will (a) keep itself and all of its
insurable properties insured at all times to such extent, by such insurers, and
against such hazards and liabilities as is generally and prudently done by like
businesses, it being understood that Borrower's insurance coverage at the date
of this credit agreement meets the standards contemplated by this subsection,
(b) give Bank prompt written notice of each material change in Borrower's
insurance coverage and the details of the change and (c) forthwith upon Bank's
written request, furnish to Bank such information about Borrower's insurance as
Bank may from time to time reasonably request, which information shall be
prepared in form and detail satisfactory to Bank and certified by an officer of
Borrower.
SECTION 5.2. MONEY OBLIGATIONS. Borrower will pay in full (a) prior in
each case to the date when penalties would attach, all taxes, assessments and
governmental charges and levies (except only those so long as and to the extent
that the same shall be contested in good faith by appropriate and timely
proceedings) for which it may be or become liable or to which any or all of its
properties may be or become subject, (b) all of its wage obligations to its
employees in compliance with the Fair Labor Standards Act (29 U.S.C. Section
206-207) or any comparable provisions, and (c) all of its other obligations
calling for the payment of money (except only those so long as and to the extent
that the same shall be contested in good faith) before such payment becomes
overdue.
SECTION 5.3. FINANCIAL STATEMENTS. Borrower will furnish to Bank (a)
within forty-five (45) days after the end of each of the first three
quarter-annual periods of each of its fiscal years, balance sheets of the
Borrower as at the end of that period and profit and loss statements,
reconciliation of surplus statements and statements of cash flows for that
period, all prepared and in form and detail satisfactory to Bank and certified
by a financial officer of Borrower, (b) within ninety (90) days after the end of
each of its fiscal years, a complete annual audit report of Borrower for that
year prepared in form and detail satisfactory to Bank and certified by an
independent public accountant satisfactory to Bank, together with a certificate
by the financial officer setting forth the Possible Defaults coming to its
attention during the course of its audit or, if none, a statement to that
effect, (c) unaudited monthly financial statements of Borrower submitted to Bank
by the 25th day of the succeeding month, (d) as soon as available, copies of all
notices, reports, proxy statements and other similar documents sent by Borrower
to its stockholders (excluding, however, matters of routine correspondence sent
by Borrower to Parent or to any affiliate in the ordinary course of Borrower's
business), to the holders of any of its debentures or bonds or the trustee of
any indenture securing the same or pursuant to which they may be issued, to any
securities exchange or to the Securities Exchange Commission or any similar
federal agency having regulatory jurisdiction over the issuance of Borrower's
securities, and (e) forthwith upon Bank's written request, such other
information about the financial condition, properties and
<PAGE> 304
operations of Borrower as Bank may from time to time reasonably request, which
information shall be submitted in form and detail satisfactory to Bank and
certified by a financial officer of Borrower.
SECTION 5.4. RECORDS. Borrower will (a) at all times maintain true and
complete records and books of account and, without limiting the generality of
the foregoing, maintain appropriate reserves for possible losses and
liabilities, all in accordance with generally accepted accounting principles
consistently applied, and (b) at all reasonable times permit Bank to examine
Borrower's books and records and to make excerpts therefrom and transcripts
thereof.
SECTION 5.5. FRANCHISES. Borrower will preserve and maintain its
corporate existence, rights and franchises.
SECTION 5.6. NOTICE. Borrower will cause its treasurer, or in his or
her absence another officer designated by the treasurer, to promptly notify Bank
whenever any Possible Default may occur hereunder or any other representation or
warranty made in Article VI hereof or elsewhere in this credit agreement or in
any Related Writing may for any reason cease in any material respect to be true
and complete.
SECTION 5.7. ERISA COMPLIANCE Borrower will not incur any material
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the regulations
thereunder, or any material liability to the Pension Benefit Guaranty
Corporation, established thereunder in connection with any Plan. Borrower will
furnish to the Bank upon its request whenever made (i) simultaneously with a
filing with the Pension Benefit Guaranty Corporation of a notice regarding any
Reportable Event and in any event within thirty (30) days after Borrower knows
or has reason to know that any Reportable Event with respect to any Plan has
occurred, a statement of the financial officer of Borrower setting forth details
as to such Reportable Event and the action which Borrower proposes to take with
respect thereto, together with a copy of the notice of such Reportable Event
given to the Pension Benefit Guaranty Corporation if a copy of such notice is
available to Borrower, (ii) promptly after the filing thereof with the Internal
Revenue Service, copies of each annual report with respect to each Plan
established or maintained by Borrower for each plan year, including (x) where
required by law, a statement of assets and liabilities of such Plan as of the
end of such plan year and statements of changes in fund balance and in financial
position, or a statement of changes in net assets available for plan benefits,
for such plan year, certified by an independent public accountant satisfactory
to the Bank and (y) an actuarial statement of such Plan applicable to such plan
year, certified by an enrolled actuary of recognized standing acceptable to the
Bank, and (iii) promptly after receipt thereof a copy of any notice Borrower may
receive from the Pension Benefit Guaranty Corporation or the Internal Revenue
Service with respect to any Plan administered by Borrower; provided, that this
latter clause shall not apply to notices of general application promulgated by
the Pension Benefit Guaranty Corporation or the Internal Revenue Service.
Borrower will promptly notify the Bank of any taxes assessed, proposed to be
assessed or which Borrower has reason to believe may be assessed against
Borrower by the Internal
<PAGE> 305
Revenue Service with respect to any Plan. As used in this subsection
"material" means the measure of a matter of significance which shall be
determined as being an amount equal to five (5%) of Borrower's Net Worth.
SECTION 5.8. ENVIRONMENTAL COMPLIANCE. Borrower will comply in all
material respects with any and all Environmental Laws including, without
limitation, all Environmental Laws in jurisdictions in which Borrower owns or
operates a facility or site, arranges for disposal or treatment of hazardous
substances, solid waste or other wastes, accepts for transport any hazardous
substances, solid waste or other wastes or holds any interest in real property
or otherwise. Borrower will furnish to Bank promptly after receipt thereof a
copy of any notice Borrower may receive from any governmental authority, private
person or entity or otherwise that any litigation or proceeding pertaining to
any environmental, health or safety matter has been filed or is threatened
against Borrower or any real property in which Borrower holds any interest or
any past or present operation of Borrower. Borrower will not allow the release
or disposal of hazardous waste, solid waste or other wastes on, under or to any
real property in which Borrower holds any interest or performs any of its
operations, in violation of any Environmental Law, which violation will have a
material adverse effect on Borrower. As used in this subsection "litigation or
proceeding" means any demand, claim, notice, suit, suit in equity, action,
administrative action, investigation or inquiry on a material matter or issue,
whether brought by any governmental authority, private person or entity or
otherwise. Borrower shall defend, indemnify and hold Bank harmless against all
costs, expenses, claims, damages, penalties and liabilities of every kind or
nature whatsoever (including attorneys fees) arising out of or resulting from
the noncompliance of Borrower with any Environmental Law. As used in this
subsection "material" means the measure of a matter of significance which shall
be determined as being an amount equal to five (5%) of Borrower's Net Worth.
SECTION 5.9. PLAN. Borrower will not suffer or permit any Plan to be
amended if, as a result of such amendment, the current liability under the Plan
is increased to such an extent that security is required pursuant to section 307
of the Employee Retirement Income Security Act of 1974, as amended from time to
time. As used herein, "current liability" means current liability as defined in
section 307 of such Act.
SECTION 5.10. NET WORTH. Borrower will not suffer or permit its Net
Worth at any time to fall below Eight Million Dollars ($8,000,000).
SECTION 5.11. INVESTMENTS. Borrower will not (a) create, acquire or
hold any Subsidiary, (b) make or hold any investment in any stocks, bonds or
securities of any kind, (c) be or become a party to any joint venture or other
partnership, (d) make or keep outstanding any advance or loan or (e) be or
become a Guarantor of any kind; provided, that this subsection shall not apply
to (i) any endorsement of a check or other medium of payment for deposit or
collection through normal banking channels or any similar transaction in the
normal course of business or (ii) any investment in direct obligations of the
United States of America or in certificates of deposit issued by a member bank
of the Federal Reserve System or (iii) any investment in commercial paper which
at the time of such investment is assigned the
<PAGE> 306
highest quality rating in accordance with the rating systems employed by either
Moody's Investors Service, Inc. or Standard & Poor's Corporation, or (iv) any
investment in repurchase agreements entered into with Bank involving the
purchase or sale of U.S. Government securities, or (v) advances or loans made
from time to time by Borrower to NACCO or to any subsidiary of NACCO or any
affiliate of any such entity or (v) any creation or acquisition of any
Subsidiary so long as no Possible Default shall then exist or immediately
thereafter will begin to exist.
SECTION 5.12. ACQUISITIONS, BULK TRANSFERS. Borrower will not (a) be a
party to any consolidation or merger or (b) purchase all or a substantial part
of the assets of any corporation or other business enterprise, or (c) lease,
sell or otherwise transfer any assets (other than such chattels, if any, as may
have become obsolete or no longer useful in the continuance of its present
business) except in the normal course of its present business; provided, that
this subsection shall not apply to any merger of a company into Borrower or to
Borrower's acquisition of any or all of the assets of any company if no Possible
Default shall then exist or immediately thereafter will begin to exist.
SECTION 5.13. LIENS. Borrower will not (a) acquire any property subject
to any inventory consignment, lease, land contract or other title retention
contract, (b) sell or otherwise transfer any Receivables, whether with or
without recourse, or (c) suffer or permit any property now owned or hereafter
acquired by it to be or become encumbered by any mortgage, security interest,
financing statement or lien of any kind or nature; provided, that this
subsection shall not apply to (i) any lien for a tax, assessment or governmental
charge or levy, (ii) any lien securing only its workers' compensation,
unemployment insurance and similar obligations, (iii) any mechanic's, carrier's
or similar common law or statutory lien incurred in the normal course of
business, (iv) any transfer of a check or other medium of payment for deposit or
collection through normal banking channels or any similar transaction in the
normal course of business, (v) any mortgage or security interest (including any
refinancing thereof in whole or in part) created by Borrower in the course of
purchasing property, or existing on property at the time of such purchase
(whether or not assumed), provided that such mortgage or security interest shall
be restricted to the property being purchased and provided, further, that the
indebtedness secured thereby shall not exceed two-thirds (2/3) of the purchase
price in the case of real estate or four-fifths (4/5) thereof in the case of
personal property, (vi) any mortgage, security interest or lien securing only
indebtedness incurred to Bank, (vii) any financing statement perfecting only a
security interest permitted by this subsection or (viii) easements,
restrictions, minor title irregularities and similar matters having no adverse
effect as a practical matter on the ownership or use of Borrower's real
property.
SECTION 5.14. BORROWINGS Borrower will not create, incur or suffer to
exist any indebtedness for borrowed money or any Funded Indebtedness of any
kind; provided, that this subsection shall not apply to (i) the loan evidenced
by this Note other Debt incurred by Borrower to Bank or (ii) any purchase money
indebtedness secured by a purchase money mortgage or security interest permitted
by subsection 5.13 hereof, or (iii) any loan obtained by
<PAGE> 307
Borrower and Subordinated in favor of Borrower's Debt to Bank pursuant to a
subordination agreement being in form and substance as Bank may require.
SECTION 5.15. INTEREST COVERAGE RATIO Borrower will maintain at all
times an Interest Coverage Ratio (calculated and determined on a quarter-annual
basis) of not less than 3.00 to 1.00.
SECTION 5.16. LEVERAGE RATIO Borrower will not suffer or permit its
Leverage Ratio (calculated and determined on a quarter-annual basis) at any time
to be greater than .48 to 1.00.
ARTICLE VI. WARRANTIES
----------
Subject only to such exceptions, if any, as have been fully disclosed in
an officer's certificate or written opinion of Borrower's counsel furnished to
Bank prior to the execution and delivery hereof, Borrower represents and
warrants as follows:
SECTION 6.1. EXISTENCE. Borrower is a corporation duly organized and
validly existing under Delaware law and is in good standing in the office of
Delaware's Secretary of State and is duly qualified to do business and is in
good standing as a foreign corporation in all other jurisdictions in which the
conduct of its operations or the ownership of its properties requires such
qualification.
SECTION 6.2. RIGHT TO ACT. No registration with or approval of any
governmental agency of any kind is required for the due execution and delivery
or for the enforceability of this Note. Borrower has legal power and right to
execute and deliver this Note and to perform and observe the provisions hereof.
By executing and delivering this Note and by performing and observing the
provisions hereof, Borrower will not violate any existing provision of its
articles of incorporation, code of regulations or by-laws or any applicable law
or violate or otherwise become in default under any existing contract or other
obligation binding upon Borrower. The officers executing and delivering this
Note on behalf of Borrower have been duly authorized to do so, and this Note is
legally binding upon Borrower in every respect.
SECTION 6.3. LITIGATION AND LIENS. No litigation or proceeding is
pending or threatened which in the opinion of Borrower's counsel might, if
successful, have a material adverse affect on the ability of Borrower to fulfill
its obligations hereunder. The Internal Revenue Service has not alleged any
default by Borrower in the payment of any tax or threatened to make any
assessment in respect thereof.
SECTION 6.4. ERISA COMPLIANCE. Borrower has not incurred any material
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the regulations
thereunder. No Reportable Event has occurred with respect to any Plan. The
Pension Benefit Guaranty
<PAGE> 308
Corporation, established thereunder has not asserted that Borrower has incurred
any material liability in connection with any Plan. No lien has been attached
and no person has threatened to attach a lien on any property of Borrower as a
result of Borrower's failing to comply with such act or regulations. As used
in this subsection "material" means the measure of a matter of significance
which shall be determined as being an amount equal to five percent (5%) of
Borrower's Net Worth.
SECTION 6.5. ACTUARIAL VALUATION REPORTS.
SECTION 6.6. ENVIRONMENTAL COMPLIANCE. Borrower is in substantial
compliance with any and all Environmental Laws including, without limitation,
all Environmental Laws in all jurisdictions in which Borrower owns or operates,
or has owned or operated, a facility or site, arranges or has arranged for
disposal or treatment of hazardous substances, solid waste or other wastes,
accepts or has accepted for transport any hazardous substances, solid waste or
other wastes or holds or has held any interest in real property or otherwise. No
litigation or proceeding arising under, relating to or in connection with any
Environmental Law is pending or threatened against Borrower, any real property
in which Borrower holds or has held an interest or any past or present operation
of Borrower. No release, threatened release or disposal of hazardous waste,
solid waste or other wastes is occurring, or has occurred, on, under or to any
real property in which Borrower holds any interest or performs any of its
operations, in violation of any Environmental Law, which violation would have a
material adverse effect on Borrower. As used in this subsection, "litigation or
proceeding" means any demand, claim, notice, suit, suit in equity, action,
administrative action, investigation or inquiry whether brought by any
governmental authority, private person or entity or otherwise, and "material"
means the measure of a matter of significance which shall be determined as being
an amount equal to five (5%) of Borrower's Net Worth.
SECTION 6.7. SOLVENCY. Borrower has received consideration which is
the reasonable equivalent value of the obligations and liabilities that Borrower
has incurred to Bank. Borrower is not insolvent as defined in any applicable
state or federal statute, nor will Borrower be rendered insolvent by the
execution and delivery of this Note to Bank. Borrower is not engaged or is about
to engage in any business or transaction for which the assets retained by it
shall be an unreasonably small capital, taking into consideration the
obligations to Bank incurred hereunder. Borrower does not intend to, nor does it
believe that it will, incur debts beyond its ability to pay them as they mature.
SECTION 6.8. FINANCIAL CONDITION. The financial statements of Borrower
prepared as of December 31, 1993, and heretofore furnished to Bank, are true and
complete (including, without limiting the generality of the foregoing, a
disclosure of all material contingent liabilities), have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with those used during its next preceding fiscal year and fairly
present its then financial condition and operations for the year then ending.
There has been no material adverse change in Borrower's financial condition,
properties or business since that date.
<PAGE> 309
SECTION 6.9. REGULATIONS.
SECTION 6.10. DEFAULTS. No Possible Default exists hereunder, nor will
any occur immediately after the execution and delivery hereof by the performance
or observance of any provision in this Note or any Related Writing.
ARTICLE VII. EVENTS OF DEFAULT
-----------------
Each of the following shall constitute an Event of Default hereunder:
SECTION 7.1. PAYMENTS. If any principal of or interest on this Note or
any premium hereunder shall not be paid as and when due and payable and shall
remain unpaid for a period of three (3) consecutive Cleveland Banking Days.
SECTION 7.2. COVENANTS. If Borrower shall fail or omit to perform or
observe any other covenant, condition, restriction or agreement contained in
this Note or in any Related Writing and that Possible Default shall not have
been corrected to Bank's complete satisfaction within thirty (30) days after the
giving of written notice of the default to Borrower.
SECTION 7.3. WARRANTIES. If (a) any representation, warranty or
statement made herein or pursuant hereto or in any Related Writing, or any other
information furnished by Borrower to Bank or to any other holder hereof, shall
be in any material respect false or erroneous, or (b) Parent (or any affiliate
of Parent) shall cease for any reason to own one hundred percent (100%) of the
outstanding capital stock of Borrower.
SECTION 7.4. CROSS DEFAULT. If Borrower defaults in any payment of
principal or interest due and owing upon any other obligation for borrowed money
beyond any period of grace provided with respect thereto or in the performance
of any other agreement, term or condition contained in any agreement under which
such obligation is created, if the effect of such default is to accelerate the
maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to its stated maturity.
SECTION 7.5. TERMINATION OF PLAN. If (a) any Reportable Event occurs
and the Bank, in its sole determination, deems such Reportable Event to
constitute grounds (i) for the termination of any Plan by the Pension Benefit
Guaranty Corporation or (ii) for the appointment by the appropriate United
States district court of a trustee to administer any Plan and such Reportable
Event shall not have been fully corrected or remedied to the full satisfaction
of the Bank within thirty (30) days after giving of written notice of such
determination to Borrower by the Bank, or (b) any Plan shall be terminated
within the meaning of Title IV of the Employee Retirement Income Security Act of
1974, as amended, or (c) a trustee shall be appointed by the appropriate United
States district court to administer any Plan, or (d) the Pension Benefit
Guaranty Corporation shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan.
<PAGE> 310
SECTION 7.6. BORROWER'S SOLVENCY. If Borrower shall (a) discontinue
business, or (b) generally not pay its debts as such debts become due, or (c)
make a general assignment for the benefit of creditors, or (d) apply for or
consent to the appointment of a receiver, a custodian, a trustee, an interim
trustee or liquidator of itself or all or a substantial part of its assets, or
(e) be adjudicated a debtor or have entered against it an order for relief under
Title 11 of the United States Code, as the same may be amended from time to
time, or (f) file a voluntary petition in bankruptcy or file a petition or an
answer seeking reorganization or an arrangement with creditors or seeking to
take advantage of any other law (whether federal or state) relating to relief of
debtors, or admit (by answer, by default or otherwise) the material allegations
of a petition filed against it in any bankruptcy, reorganization, insolvency or
other proceeding (whether federal or state) relating to relief of debtors, or
(g) suffer or permit to continue unstayed and in effect for thirty (30)
consecutive days any judgment, decree or order, entered by a court of competent
jurisdiction, which approves a petition seeking its reorganization or appoints a
receiver, a custodian, a trustee, an interim trustee or liquidator of itself or
of all or a substantial part of its assets, or (h) take or omit any other action
in order thereby to effect any of the foregoing.
ARTICLE VIII. REMEDIES UPON DEFAULT
---------------------
Notwithstanding any contrary provision or inference herein or elsewhere,
SECTION 8.1. OPTIONAL ACCELERATION. Should any event of default
referred to in subsections 7.1, 7.2, 7.3, 7.4 or 7.5 hereof occur, then or at
any time thereafter the holder of this Note may at its option declare this Note
and all other Debt to be forthwith due and payable, and the principal of and
interest on this Note and all other Debt shall thereupon become and thereafter
be immediately due and payable in full without any presentment of this Note,
demand for payment or notice of any kind, all of which Borrower hereby waives.
SECTION 8.2. AUTOMATIC ACCELERATION. Should any event of default
referred to in subsection 7.6 hereof occur, then the principal of and interest
on this Note and all other Debt shall, if not already due and payable, thereupon
become and thereafter be immediately due and payable in full without any
presentment of this Note, demand for payment or notice of any kind, all of which
Borrower hereby waives.
SECTION 8.3. OFFSETS. Bank shall have the right, at any time after the
occurrence of any Possible Default referred to in subsection 7.6 hereof, to
setoff against and to appropriate and apply toward the payment of, the principal
of and interest on this Note and all other Debt then owing by Borrower to Bank,
whether or not then matured, any and all deposit balances and all other
indebtedness at such time held or owing by Bank to or for the credit or account
of Borrower. Borrower waives notice of any setoff, appropriation and
application.
<PAGE> 311
ARTICLE IX. MISCELLANEOUS
-------------
SECTION 9.1. INTERPRETATION. Each right, power or privilege specified
or referred to in section 8 or elsewhere in this Note or in any Related Writing
is in addition to any other rights, powers and privileges that Bank may
otherwise have or acquire by operation of law, by other contract or otherwise.
No course of dealing in respect of, nor any omission or delay in the exercise
of, any right, power or privilege by Bank shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any further or other
exercise thereof or of any other, as each right, power or privilege may be
exercised independently or concurrently with others and as often and in such
order as Bank may deem expedient. Bank may from time to time grant Borrower
waivers and consents in respect of this Note and the Related Writings, but no
such waiver or consent shall be binding upon Bank unless specifically granted in
writing, which writing shall be strictly construed. It is of the essence of the
loan evidenced by this Note that every representation, warranty or certification
made in or pursuant to this Note or any Related Writing by or on behalf of
Borrower be true and complete in every material respect and that Borrower duly
perform and observe every covenant, condition, restriction or agreement
contained in this Note or any Related Writing and binding upon Borrower. Each
right, power or privilege granted to Bank in this Note or in any Related
Writings is for the benefit of and exercisable by each subsequent holder, if
any, of this Note, and all provisions of this Note shall bind Borrower and its
successors and assigns and shall benefit Bank and its successors and assigns,
including each subsequent holder, if any, of this Note. Whenever any payment to
be made hereunder shall be stated to be due on a day other than a Cleveland
Banking Day, such payment may be made on the next succeeding Cleveland Banking
Day and such extension of time shall in each case be included in the computation
of the interest payable on this Note; provided, however, that with respect to
any LIBOR Loan, if the next succeeding Cleveland Banking Day falls in the
succeeding calendar month, such payment shall be made on the preceding Cleveland
Banking Day and the relevant maturity of such LIBOR Loan shall be adjusted
accordingly. All payments to be made hereunder shall be made to Bank in
immediately available funds. The relationship between Borrower and Bank with
respect to this Note and any Related Writing is and shall be solely that of
debtor and creditor, respectively, and Bank has no fiduciary obligation toward
Borrower with respect to any such document or the transactions contemplated
thereby. The several captions to different sections and subsections of this
Note are inserted for convenience only and shall be ignored in interpreting the
provisions of this Note. If at any time one or more provisions of this Note,
any amendment or supplement thereto or any Related Writing is or becomes
invalid, illegal or unenforceable in whole or in part, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby. This Note, any Related Writing and all amendments or
supplements thereto shall be governed by the laws of the State of Ohio, without
regard to principles of conflict of laws.
SECTION 9.2. NOTICE. A notice to or request of Borrower shall be
deemed to have been made hereunder whenever a writing to that effect shall have
been delivered to an officer of Borrower or two (2) Cleveland Banking Days after
such a writing shall have been sent by registered or certified mail to Borrower
at the address set forth below (or to such other address as Borrower may
hereafter furnish to Bank in writing for such purpose); but no other
<PAGE> 312
method of giving notice to or making a request of Borrower is hereby precluded.
Every notice or writing required to be given to Bank pursuant to this Note
shall be delivered to a commercial loan officer of Bank at its main office.
SECTION 9.3. STAMP TAXES; COSTS OF COLLECTION. Borrower agrees to
defend, indemnify and save Bank harmless from and against any documentary stamp
tax (including any penalty or interest), which agreement shall survive the
payment of this Note. Borrower also agrees to promptly reimburse Bank for all
costs and expenses, including attorney's fees, incurred by Bank in connection
with any restructurings of this Note and any Related Writing and in connection
with any collection proceedings as a result of nonpayment of this Note, as and
when due and payable.
SECTION 9.4. CAPITAL ADEQUACY. If Bank shall determine, after the date
hereof, that the adoption of any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Bank (or its lending office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on Bank's capital (or on the capital of
Bank's holding company) as a consequence of the loan evidenced by this Note to a
level below that which Bank (or its holding company) could have achieved but for
such adoption, change or compliance (taking into consideration Bank's policies
or the policies of its holding company with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time, within 15 days
after demand by Bank, the Borrower shall pay to Bank such additional amount or
amounts as will compensate Bank (or its holding company) for such reduction.
Bank will designate a different lending office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of Bank, be otherwise disadvantageous to Bank. A certificate of Bank
claiming compensation under this section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
error. In determining such amount, Bank may use any reasonable averaging and
attribution methods. Failure on the part of Bank to demand compensation for any
reduction in return on capital with respect to any period shall not constitute a
waiver of Bank's rights to demand compensation for any reduction in return on
capital in such period or in any other period. The protection of this section
shall be available to Bank regardless of any possible contention of the
invalidity or inapplicability of the law, regulation or other condition which
shall have been imposed.
SECTION 9.5. ENTIRE AGREEMENT. This Note and any agreement, document
or instrument referred to herein or executed on or as of the date hereof
integrate all of the terms and conditions mentioned herein or incidental hereto
and supersede all oral representations and negotiations and prior writings with
respect to the subject matter hereof.
SECTION 9.6. WARRANT OF ATTORNEY. Borrower authorizes any attorney at
law to appear before any court of record, state or federal, in the United States
of America
<PAGE> 313
(other than any court in which utilization of this warrant of attorney would be
contrary to law) after the above indebtedness becomes due, whether by lapse of
time or by acceleration of maturity, to waive the issuance and service of
process, to admit the maturity and nonpayment of this Note, to confess judgment
against Borrower in favor of the holder of this Note for the amount then
appearing due, together with costs of suit, and thereupon to release all errors
and waive all rights of appeal and stay of execution. The foregoing warrant of
attorney shall survive the judgment; should any judgment be vacated for any
reason the foregoing warrant of attorney nevertheless may thereafter be
utilized for obtaining additional judgment or judgments. Borrower agrees that
the holder's attorney may confess judgment pursuant to the foregoing warrant of
attorney. Borrower further agrees that the attorney confessing judgment
pursuant to the foregoing warrant of attorney may receive a legal fee or other
compensation from the holder.
SECTION 9.6. JURY TRIAL WAIVER. BORROWER, TO THE EXTENT PERMITTED BY
LAW, WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN BANK AND BORROWER
ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN BORROWER AND BANK IN CONNECTION WITH THIS NOTE
OR ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN
CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY BANK'S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED
IN THIS NOTE, ANY GUARANTY OF PAYMENT OR ANY OTHER AGREEMENT, INSTRUMENT OR
DOCUMENT RELATED THERETO.
Address: 71 East Water Street THE KITCHEN COLLECTION, INC.
Chillicothe, Ohio 45601
By: Randolph J. Gawalek
------------------------------
Title: Executive Vice President
---------------------------
And: Charles Reisinger
-----------------------------
Title: Vice President & Treasurer
---------------------------
Address: 127 Public Square SOCIETY NATIONAL BANK
Cleveland, Ohio 44114
By: Marianne Meal
------------------------------
Its: Asst. Vice President
-----------------------------
<PAGE> 1
<TABLE>
EXHIBIT 11
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Year Ended December 31
------------------------------------------------
1995 1994 1993
---- ---- ----
(Amounts in thousands, except per share data)
<S> <C> <C> <C>
Income:
------
Income before extraordinary items $ 65,506 $ 45,272 $ 11,593
Extraordinary gain, net-of-tax 32,333 -- --
Extraordinary charges, net-of-tax (3,399) (3,218) (3,292)
------------ ------------ ------------
Net income $ 94,440 $ 42,054 $ 8,301
============ ============ ============
Per share amounts reported
to stockholders - Note 1:
------------------------
Income before extraordinary items $ 7.31 $ 5.06 $ 1.30
Extraordinary gain, net-of-tax 3.61 -- --
Extraordinary charges, net-of-tax (.38) (.36) (.37)
------------ ------------ ------------
Net income $ 10.54 $ 4.70 $ .93
============ ============ ============
Primary:
-------
Weighted average shares outstanding 8,963 8,948 8,938
Dilutive stock options - Note 2 12 12 15
------------ ------------ ------------
Totals 8,975 8,960 8,953
============ ============ ============
Per share amounts
Income before extraordinary items $ 7.30 $ 5.05 $ 1.30
Extraordinary gain, net-of-tax 3.60 -- --
Extraordinary charges, net-of-tax (.38) (.35) (.37)
------------ ------------ ------------
Net income $ 10.52 $ 4.70 $ .93
============ ============ ============
Fully diluted:
-------------
Weighted average shares outstanding 8,963 8,948 8,938
Dilutive stock options - Note 2 12 9 17
------------ ------------ ------------
Totals 8,975 8,957 8,955
============ ============ ============
Per share amounts
Income before extraordinary items $ 7.30 $ 5.05 $ 1.30
Extraordinary gain, net-of-tax 3.60 -- --
Extraordinary charges, net-of-tax (.38) (.35) (.37)
------------ ------------ ------------
Net income $ 10.52 $ 4.70 $ .93
============ ============ ============
<FN>
NOTE 1 - Per share earnings have been computed and reported to the stockholders pursuant to APB Opinion No. 15, which provides that
"any reduction of less than 3% in the aggregate need not be considered as dilution in the computation and presentation of earnings
per share data."
NOTE 2 - Dilutive stock options are calculated based on the treasury stock method. For primary per share earnings the average
market price is used. For fully diluted per share earnings the year-end market price, if higher than the average market price, is
used.
</TABLE>
<PAGE> 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:
<TABLE>
<CAPTION>
Name Incorporation
- ---- -------------
<S> <C>
Bellaire Corporation Ohio
The Coteau Properties Company Ohio
The Falkirk Mining Company Ohio
Hamilton Beach/Proctor-Silex, Inc. Delaware (1)
Housewares Holding Company Delaware (1)
HBPS Foreign Sales Corp. Virgin Islands
HB-PS Holding Company, Inc. Delaware (1)
NACCO Materials Handling Group, Pty. Ltd. Australia
NACCO Materials Handling B.V. Netherlands
Hyster Europe Limited United Kingdom
NACCO Materials Handling Scotland Ltd. United Kingdom
NACCO Materials Handling (N.I.) Ltd. Northern Ireland
NACCO Materials Handling Group Ltd. United Kingdom
Hyster-Yale Materials Handling, Inc. Delaware (2)
The Kitchen Collection, Inc. Delaware
NACCO Materials Handling Group, Inc. Delaware
The North American Coal Corporation Delaware
North American Coal Royalty Company Delaware
Powhatan Corporation Delaware
Proctor-Silex Canada, Inc. Ontario (Canada)
Proctor-Silex, S.A. de C.V. Mexico
The Sabine Mining Company Texas
Yale Europe Materials Handling Ltd. United Kingdom
</TABLE>
The Company has omitted the names of its subsidiaries which, considered in the
aggregate as a single subsidiary, would not constitute a "significant
subsidiary" within the meaning of Rule 1-02 contained in Regulation S-X.
- ------------
1. NACCO owns 100% of the voting securities of Housewares Holding Company,
Housewares Holding Company owns 80% of the voting securities of HB-PS
Holding Company, Inc., HB-PS Holding Company, Inc. owns 100% of
Hamilton Beach(Diamond)Proctor- Silex, Inc., and Hamilton
Beach(Diamond)Proctor-Silex, Inc. S.A. de C.V. (except for directors'
qualifying shares).
2. NACCO Industries, Inc. owns 97% of the voting securities of Hyster-Yale
Materials Handling Group, Inc.
<PAGE> 1
Exhibit 23(i)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
NACCO Industries, Inc.
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement (No. 33-3422) on Form S-4 and Registration Statement
(No. 33-52660) on Form S-8.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
March 28, 1996
<PAGE> 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 Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
Owsley Brown II
---------------
Owsley Brown II
Date: March 5, 1996
<PAGE> 2
EXHIBIT 24(ii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
John J. Dwyer
-------------
John J. Dwyer
Date: February 21, 1996
<PAGE> 3
EXHIBIT 24(iii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
Robert M. Gates
---------------
Robert M. Gates
Date: February 14, 1996
<PAGE> 4
EXHIBIT 24(iv)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
Leon J. Hendrix, Jr.
--------------------
Leon J. Hendrix, Jr.
Date: February 14, 1996
<PAGE> 5
EXHIBIT 24(v)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
Dennis W. LaBarre
-----------------
Dennis W. LaBarre
Date: February 14, 1996
<PAGE> 6
EXHIBIT 24(vi)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Chairman, President and
Chief Executive Officer and Director NAACO Industies, Inc. hereby constitutes
and appoints Frank B. O'Brien, Charles A. Bittenbender and Steven M. Billick,
and each of them, as the true and lawful attorney or attorneys-in-fact, with
full power of substitution and revocation, for the undersigned and in the name,
place and stead of the undersigned, to sign on behalf of the undersigned as
Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report
pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for
the fiscal year ended December 31, 1995, 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.
Alfred M. Rankin, Jr.
-------------------------
Alfred M. Rankin, Jr.
<PAGE> 7
EXHIBIT 24(vii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
Ian M. Ross
-----------
Ian M. Ross
Date: February 14, 1996
<PAGE> 8
EXHIBIT 24(viii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
John C. Sawhill
---------------
John C. Sawhill
Date: February 14, 1996
<PAGE> 9
EXHIBIT 24(ix)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
Britton T. Taplin
-----------------
Britton T. Taplin
Date: February 14, 1996
<PAGE> 10
EXHIBIT 24(x)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Frank B. O'Brien, Charles A.
Bittenbender and Steven M. Billick, and each of them, as the true and lawful
attorney or attorneys-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to
sign on behalf of the undersigned as Director of NACCO Industries, Inc., a
Delaware corporation, an Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
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.
Frank E. Taplin, Jr.
------------------------
Frank E. Taplin, Jr.
Date:February 14, 1996
<PAGE> 11
EXHIBIT 24(xi)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Vice President and
Controller of NAACO Industries, Inc. hereby constitutes and appoints Frank B.
O'Brien, Charles A. Bittenbender and Steven M. Billick, and each of them, as
the true and lawful attorney or attorneys-in-fact, with full power of
substitution and revocation, for the undersigned and in the name, place and
stead of the undersigned, to sign on behalf of the undersigned as Director of
NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to
Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal
year ended December 31, 1995, 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.
Steven M Billick
----------------
Steven M Billick
<PAGE> 12
EXHIBIT 24(xii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Senior Vice President,
Corporate Development and Chief Financial Officer of NAACO Industries, Inc.
hereby constitutes and appoints Frank B. O'Brien, Charles A. Bittenbender and
Steven M. Billick, and each of them, as the true and lawful attorney or
attorneys-in-fact, with full power of substitution and revocation, for the
undersigned and in the name, place and stead of the undersigned, to sign on
behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware
corporation, an Annual Report pursuant to Section 13 of the Securities Exchange
Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995, 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.
Frank B. O'Brien
----------------
Frank B. O'Brien
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 30,924
<SECURITIES> 0
<RECEIVABLES> 284,235
<ALLOWANCES> 11,300
<INVENTORY> 388,819
<CURRENT-ASSETS> 722,005
<PP&E> 534,477
<DEPRECIATION> 385,700
<TOTAL-ASSETS> 1,833,837
<CURRENT-LIABILITIES> 523,722
<BONDS> 0
0
0
<COMMON> 8,966
<OTHER-SE> 361,161
<TOTAL-LIABILITY-AND-EQUITY> 1,833,837
<SALES> 2,190,375
<TOTAL-REVENUES> 2,204,517
<CGS> 1,778,779
<TOTAL-COSTS> 2,053,455
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,879
<INCOME-PRETAX> 103,518
<INCOME-TAX> 34,681
<INCOME-CONTINUING> 65,506
<DISCONTINUED> 0
<EXTRAORDINARY> 28,934
<CHANGES> 0
<NET-INCOME> 94,440
<EPS-PRIMARY> 10.54
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99(i)
Audited Consolidated Financial Statements
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
As of December 31, 1995 and 1994
<TABLE>
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Stockholder's Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
The North American Coal Corporation:
We have audited the accompanying consolidated balance sheets of The North
American Coal Corporation and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholder's equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The North American Coal
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas,
February 2, 1996
<PAGE> 3
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 4
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1995 and 1994
(Amounts in Thousands)
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,700 $ 5,562
Note receivable from parent Company 14,939 22,709
Accounts receivable 23,156 23,801
Inventories 29,736 27,211
Other current assets 2,064 2,052
-------------- -------------
74,595 81,335
OTHER ASSETS:
Notes receivable 3,217 3,790
Costs recoverable under sales contracts 5,785 6,945
Other investments and receivables 13,804 12,899
-------------- -------------
22,806 23,634
PROPERTY, PLANT & EQUIPMENT -- at cost:
Coal lands and real estate 92,450 68,527
Plant and equipment 439,862 422,061
Construction in progress 6,485 2,737
-------------- -------------
538,797 493,325
Less allowance for depreciation, depletion
and amortization (208,330) (192,307)
-------------- -------------
330,467 301,018
DEFERRED CHARGES:
Prepaid royalties 6,492 5,943
Deferred lease costs 34,936 33,154
Other 4,654 16,213
-------------- -------------
46,082 55,310
-------------- -------------
$ 473,950 $ 461,297
============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE> 5
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 19,769 $ 10,461
Payable to affiliated companies 948 4,295
Accrued liabilities 25,596 21,580
Revolving credit agreements - 15,000
Current maturities of long-term obligations 16,489 17,841
-------------- -------------
62,802 69,177
NON-CURRENT LIABILITIES:
Deferred income taxes 19,156 17,488
Pension compensation and other accrued liabilities 24,955 22,140
-------------- -------------
44,111 39,628
LONG-TERM OBLIGATIONS:
Subsidiaries' liabilities--(not guaranteed by the
Company or the parent Company):
Advances from customers 176,384 135,973
Notes payable 23,872 55,967
Notes payable to affiliated company 32 145
Capitalized lease obligations 146,384 140,091
-------------- -------------
346,672 332,176
MINORITY INTEREST 5,240 5,191
STOCKHOLDER'S EQUITY:
Common Stock, par value $1 a share:
authorized 750 shares; issued and
outstanding 500 shares 1 1
Capital in excess of par value 15,124 15,124
Retained income - -
-------------- -------------
15,125 15,125
-------------- -------------
$ 473,950 $ 461,297
============== =============
</TABLE>
-3-
<PAGE> 6
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1995 and 1994
(Amounts in Thousands)
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
TONS OF COAL SOLD 26,680 27,183
============== ==============
INCOME:
Net sales $ 234,354 $ 239,391
Royalties, rental and other operating income 13,632 10,788
Interest, gain on sale of assets and miscellaneous income 4,984 4,312
-------------- --------------
252,970 254,491
COSTS AND EXPENSES:
Cost of sales 162,377 161,814
Depreciation, depletion and amortization 30,382 30,856
Selling, administrative and general expenses 9,448 9,560
Interest expense of subsidiaries 15,312 19,321
-------------- --------------
217,519 221,551
-------------- --------------
Income before income taxes and minority interest 35,451 32,940
INCOME TAXES:
Current 9,150 9,690
Deferred 1,690 (209)
-------------- --------------
10,840 9,481
Minority interest in income of consolidated subsidiary 2,018 2,484
-------------- --------------
Net income $ 22,593 $ 20,975
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 7
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1995 and 1994
(Amounts in Thousands)
<TABLE>
<CAPTION>
Capital In
Common Excess of Par Retained
Stock Value Income Total
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $ 1 $ 32,390 $ 1,371 $ 33,762
Net income - - 20,975 20,975
Dividends - (20,654) (22,346) (43,000)
Contribution from affiliate - 3,388 - 3,388
------------- -------------- -------------- -------------
Balance at December 31, 1994 $ 1 $ 15,124 $ - $ 15,125
Net income - - 22,593 22,593
Dividends - - (22,593) (22,593)
------------- -------------- -------------- -------------
Balance at December 31, 1995 $ 1 $ 15,124 $ - $ 15,125
============= ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE> 8
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995 and 1994
(Amounts in Thousands)
<TABLE>
<CAPTION>
1995 1994
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 22,593 $ 20,975
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 30,382 30,856
Gain on sale of assets (279) (136)
Costs recovered under sales contracts 1,160 1,490
Deferred lease costs (1,782) (1,956)
Deferred income taxes 1,690 (209)
Pensions and other accruals 1,280 3,918
Prepaid royalties (610) (539)
Other deferred costs 208 (2,351)
------------- --------------
54,642 52,048
Working capital changes:
(Increase) decrease in accounts receivable and other assets 113 (3,250)
Increase in inventories (2,525) (3,398)
Increase in accounts payable and other liabilities 10,920 1,809
------------- --------------
8,508 (4,839)
------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 63,150 47,209
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (22,611) (12,136)
Proceeds from property disposals 552 2,804
Repayment of note receivable from parent Company, net 7,770 17,138
Reduction in notes receivable 552 1,412
Other - net (1,841) (2,702)
------------- --------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (15,578) 6,516
FINANCING ACTIVITIES:
Additions to (repayment of) lines of credit, net (16,717) 305
Additions to advances from customers, net 40,411 2,626
Additions to long-term obligations 52,535 53,768
Repayment of long-term obligations (102,070) (68,019)
Dividends (22,593) (43,000)
------------- --------------
NET CASH USED BY FINANCING ACTIVITIES (48,434) (54,320)
------------- --------------
DECREASE IN CASH AND CASH EQUIVALENTS (862) (595)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,562 6,157
------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,700 $ 5,562
============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE> 9
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Amounts In Thousands)
December 31, 1995 and 1994
NOTE A--ORGANIZATION
The North American Coal Corporation ("Company") is a wholly owned subsidiary of
NACCO Industries, Inc. ("parent Company"). The Company is the owner of The
Coteau Properties Company ("Coteau"), The Falkirk Mining Company ("Falkirk"),
The Sabine Mining Company ("Sabine"), Red River Mining Company, its joint
venture, ("Red River Mining"), and North American Coal Royalty Company. The
Company is principally engaged in lignite mining through the operation of
surface mines in North Dakota, Texas and Louisiana. The Company has also begun
operating a dragline at a limestone quarry in Florida.
Three of the Company's consolidated coal mining subsidiaries (surface mines)
were organized to assume sales agreements with public utilities. All of the
coal of these subsidiaries is sold to these public utilities pursuant to
long-term contracts with terms up to 20 years and with extensions at the
buyer's option. The sales prices provided by such contracts are based on cost
plus a profit per ton. As each mining subsidiary has a contract to provide
coal to its customer, a significant portion of their revenue is derived from a
single source. The financial position of the mining subsidiary and the Company
could be materially impacted if the relationship with the customer was
terminated or altered.
In December 1994, the Company recorded a contribution from a subsidiary of the
parent Company. This contribution represented royalty revenue received in
prior years by the subsidiary on a mine previously held by the Company. The
contribution was funded by a note receivable from the parent Company.
NOTE B--ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company, its wholly owned subsidiaries and its joint venture.
Intercompany accounts have been eliminated.
CASH AND CASH EQUIVALENTS: Cash equivalents are investments purchased with an
original maturity of three months or less.
INVENTORIES: Inventories are stated at the lower of cost or market.
COSTS RECOVERABLE UNDER SALES CONTRACTS: The coal sales agreements
("Agreements") of three subsidiaries provided for selling prices which allowed
a profit during the defined development period of the mines. Production costs
incurred during the development period in excess of the established selling
price, as set forth in the Agreements, were deferred and are being recovered as
a cost of coal tonnage sold after the development period. Recoveries of these
costs amounted to approximately $1,160,000 and $1,490,000 in 1995 and 1994,
respectively, and are included in net sales in the accompanying consolidated
statements of income.
DEPRECIATION, DEPLETION AND AMORTIZATION: Depreciation, depletion and
amortization are provided in amounts sufficient to amortize the cost of related
assets (including assets recorded under capitalized lease obligations) over
their estimated range of useful lives and are calculated by either the
straight-line method or the units-of-production method based on estimated
recoverable tonnage.
-7-
<PAGE> 10
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE B--ACCOUNTING POLICIES --continued
RECLAMATION COSTS: Under certain federal and state regulations, the Company's
subsidiaries are required to reclaim land disturbed as a result of mining.
Reclamation of disturbed land is a continuous process throughout the term of
the related Agreements. Current reclamation costs are being recovered as a
cost of coal tonnage sold. Costs to complete reclamation after mining has been
completed are reimbursed under the Agreements.
PRIOR YEAR FINANCIAL STATEMENTS: Certain reclassifications have been made to
the 1994 financial statements to conform to the 1995 presentation.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS: The fair values of
financial instruments have been determined through information obtained from
quoted market sources and management estimates. The Company does not hold or
issue financial instruments or derivative financial instruments for trading
purposes.
The Company enters into interest rate swap agreements and interest rate cap
agreements with terms ranging from two to four years. The differential between
the floating interest rate and the fixed interest rate which is to be paid or
received is recognized in interest expense as the floating interest rate
changes over the life of the agreement.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
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.
NOTE C--ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1994
------------- --------------
<S> <C> <C>
Accounts receivable $ 18,783 $ 17,799
Accounts receivable from affiliated companies 3,588 5,520
Refundable income taxes 785 482
------------- --------------
$ 23,156 $ 23,801
============= ==============
</TABLE>
-8-
<PAGE> 11
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE D--INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1994
------------- --------------
<S> <C> <C>
Coal $ 10,618 $ 8,404
Mining supplies 19,118 18,807
------------- --------------
$ 29,736 $ 27,211
============= ==============
</TABLE>
NOTE E--ADVANCES FROM CUSTOMERS
Advances from customers represent amounts advanced to Coteau and Falkirk from
public utilities to develop, operate and provide working capital for the mines.
These advances are secured by all owned assets and assignment of all rights
under the Agreements of Coteau and Falkirk, are non interest-bearing, and are
without recourse to the Company and the parent Company. No repayment schedule
has been established for Falkirk due to the funding agreement with the
customer.
Estimated maturities for Coteau for the next five years, including current
maturities, are as follows:
<TABLE>
<S> <C>
1996 $ 9,079
1997 9,079
1998 9,079
1999 9,079
2000 9,079
Thereafter 74,035
----------------
$ 119,430
================
</TABLE>
NOTE F--NOTES PAYABLE
The promissory notes represent borrowings which the public utility arranged for
Sabine. The note payable at Coteau represented financing for leaseholds on
coal lands received from an affiliate of Coteau's buyer. Neither the Company
nor the parent Company have guaranteed these borrowings. Notes payable, less
current maturities, consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
THE COTEAU PROPERTIES COMPANY
Mortgage note to an affiliate of Coteau's customer with
an interest rate of 10.94%, refinanced through advances
from customer in January 1995. $ - $ 37,297
</TABLE>
-9-
<PAGE> 12
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE F--NOTES PAYABLE--continued
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Mortgage note with no interest. The note requires
eight equal quarterly payments, beginning January 5, 1996,
and is secured by the related coal lands. 3,000 -
THE SABINE MINING COMPANY
Promissory notes guaranteed by a $9.25 million
irrevocable letter of credit issued by a bank
pursuant to a credit agreement which was
canceled in April 1995. Under the terms of
such agreement, substantially all assets were
pledged and all rights under the Agreement
were assigned. - 1,250
Promissory note payable to a bank under an
agreement providing for borrowings up to $25
million. Interest is based on the bank's daily cost of
funds plus .45% (average interest rate of 6.34%
for 1995). Under the terms of such agreement,
substantially all assets are pledged and all rights
under the Agreement are assigned. 16,172 11,610
Secured note payable due June 1, 2001, with a fixed
interest rate of 8.65% per annum on the unpaid
balance. Under the terms of such agreement,
substantially all assets are pledged and all rights
under the Agreement are assigned. 4,500 5,500
OTHER 200 310
-------------- --------------
$ 23,872 $ 55,967
============== ==============
</TABLE>
Note maturities for the next five years, including current maturities, are as
follows:
<TABLE>
<S> <C> <C>
1996 $ 5,181
1997 6,242
1998 3,242
1999 3,142
2000 3,142
Thereafter 8,104
---------------
$ 29,053
===============
</TABLE>
-10-
<PAGE> 13
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE F--NOTES PAYABLE--continued
Commitment fees paid to banks were approximately $46,000 and $75,000 in 1995
and 1994, respectively, and are included in interest expense in the
accompanying consolidated statements of income.
Sabine entered into a $15 million term loan in February 1996, with a bank.
This loan provides for an interest rate based on LIBOR plus .30% on the unpaid
balance and is due February 20, 2002. In connection with this financing, the
promissory note payable to a bank for borrowings up to $25 million was reduced
to $10 million. Under the terms of these agreements, substantially all assets
are pledged and all rights under the agreement are assigned.
NOTE G--REVOLVING CREDIT AGREEMENT
During 1995, the Company had a revolving credit agreement which is summarized
as follows:
<TABLE>
<S> <C>
Amount of revolving credit agreement $50,000,000
Amount available at December 31, 1995 $50,000,000
Stated interest rate LIBOR + .4375%
Average interest rate during 1995 5.90%
Commitment and facility fee .20% per annum
Expiration date (with annual renewal option) September 27, 2000
</TABLE>
The Company enters into interest rate swap agreements which allow the Company
to enter into long-term credit arrangements that have performance based,
floating rates of interest and then swap them into fixed rates as opposed to
entering into higher cost fixed-rate credit arrangements. These agreements are
with major commercial banks; therefore, the risk of credit loss from
nonperformance by the banks is minimal. The Company evaluates its exposure to
floating rate debt on an ongoing basis. The following table summarizes the
notional amounts and related rates on interest rate swap agreements and
interest rate cap agreements outstanding at December 31, 1995:
<TABLE>
<CAPTION>
Variable Fixed
Notional Rate Rate
Amount Received Paid
-------- -------- ---------
<S> <C> <C> <C>
Swap $10,000 5.94% 6.60%
Cap 3,000 5.94% 4.00%
</TABLE>
-11-
<PAGE> 14
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE H--POSTRETIREMENT PLANS
The Company and its affiliates, representing the mining operations of the
parent Company, sponsor defined benefit pension plans which cover substantially
all salaried employees of the Company and its subsidiaries. Benefits under the
plans are based on years of service and average compensation during certain
periods. The Company's funding policy is to contribute within the range
allowed by the applicable regulations. Plan assets are primarily listed stocks
and U.S. bonds.
The following is a detail of net periodic pension expense for all mining
operations of the parent Company:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Service cost $ 1,805 $ 2,440
Interest cost on projected benefit obligation 2,414 2,528
Actual return on plan assets (6,891) 638
Net amortization and deferral 4,538 (2,886)
-------------- -------------
Net periodic pension expense $ 1,866 $ 2,720
============== =============
</TABLE>
The following sets forth the funded status of the plans:
Actuarial present value of benefit obligation:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Vested accumulated benefit obligation $ 19,034 $ 12,505
Nonvested accumulated benefit obligation 3,313 1,530
-------------- --------------
Total accumulated benefit obligation 22,347 14,035
Value of future salary projections 17,738 13,596
-------------- --------------
Total projected benefit obligation 40,085 27,631
Fair value of plan assets 30,622 22,915
-------------- --------------
Projected benefit obligation in excess of plan assets (9,463) (4,716)
Amounts not recognized:
Unrecognized net transition asset (838) (1,005)
Unrecognized net gain (6,578) (10,430)
Prior service cost 705 762
-------------- --------------
Pension obligation recognized $ (16,174) $ (15,389)
============== ==============
</TABLE>
-12-
<PAGE> 15
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE H--POSTRETIREMENT PLANS--continued
Assumptions used in accounting for the defined benefit plans:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
--------- ---------
<S> <C> <C>
Weighted average discount rates 7.50% 8.50%
Rate of increase in compensation levels 4.50% 5.50%
Expected long-term rate of return on assets 9.00% 9.00%
</TABLE>
The Company and its subsidiaries participate in a defined contribution plan
sponsored by the Company which covers substantially all salaried employees.
The plan provides for employee contributions to be matched, by the respective
company, up to a limit of 5% of the employee's salary. Company contributions
to the plan were approximately $2,515,000 and $2,387,000 in 1995 and 1994,
respectively.
NOTE I--OTHER POSTRETIREMENT BENEFITS
The expected cost of retirement benefits other than pensions is charged to
expense during the years that the employees render service. Under the
provisions of the Agreements of three subsidiaries, costs will be recovered as
a cost of coal tonnage sold. Because SFAS 106 is not material to the Company's
results of operations and financial condition, the detailed disclosures
required by SFAS 106 have not been presented.
Coteau and Sabine established Voluntary Employees' Beneficiary Association
(VEBA) trusts in 1993 to provide for such future retirement benefits. Coteau
and Sabine made cash contributions to the VEBA trusts of approximately $462,000
and $496,000 in 1995 and 1994, respectively. Coteau and Sabine have requested,
but have not yet received, a determination letter from the Internal Revenue
Service (IRS) regarding recognition of the tax-exempt status of each of the
VEBA trusts. Contributions made to an IRS approved VEBA trust are irrevocable
and must be used for employee benefits.
NOTE J--COMMITMENTS
Certain mining equipment leased by Coteau, Falkirk, and Sabine and certain
office and other equipment leased by the Company are capitalized for financial
statement purposes. The parent Company is not obligated under capital or
operating lease agreements of the Company. Under the provisions of the
Agreements, the customer is required to pay, as part of the cost of coal
purchased, an amount equal to the annual lease payments. Interest expense and
amortization in excess of annual lease payments are deferred and are recognized
in years when annual lease payments exceed interest expense and amortization.
Interest paid on notes and capitalized lease obligations amounted to
approximately $15,841,000 and $18,949,000 in 1995 and 1994, respectively.
-13-
<PAGE> 16
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE J--COMMITMENTS --continued
Assets recorded under capitalized lease obligations are included with property,
plant and equipment and consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Plant and equipment $ 201,048 $ 188,149
Accumulated amortization (78,291) (71,655)
-------------- --------------
$ 122,757 $ 116,494
============== ==============
</TABLE>
Capitalized lease obligations are renewable for additional periods at terms
based upon fair market value of the leased items at the renewal dates.
During 1995 and 1994, subsidiaries of the Company incurred capitalized lease
obligations of approximately $17,985,000 and $5,157,000, respectively, in
connection with lease agreements to acquire plant and equipment. During 1995,
a subsidiary of the Company entered into a $6,000,000 note payable to acquire
coal lands.
Future minimum lease payments as of December 31, 1995, for all capitalized
lease obligations are as follows:
<TABLE>
<S> <C>
1996 $ 23,085
1997 22,234
1998 21,512
1999 21,111
2000 20,203
Thereafter 139,735
-------------
Total minimum lease payments 247,880
Amounts representing interest (90,188)
-------------
Present value of net minimum lease payments 157,692
Current maturities (11,308)
-------------
$ 146,384
=============
</TABLE>
-14-
<PAGE> 17
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE J--COMMITMENTS--continued
The Company is committed under non cancelable operating leases, with minimum
lease payments as of December 31, 1995, as follows:
<TABLE>
<S> <C>
1996 $ 1,898
1997 1,957
1998 1,824
1999 1,243
2000 1,074
Thereafter 5,369
--------------
$ 13,365
==============
</TABLE>
Rental expenses for all operating leases amounted to approximately $992,000
and $1,168,000 during 1995 and 1994, respectively.
At December 31, 1995, the unexpended portion of capital expenditures authorized
by the respective boards of directors, and customers where required, of the
Company and its subsidiaries approximated $49,361,000, of which $48,244,000 is
being financed under the arrangements with public utilities served by the
subsidiaries.
NOTE K--INCOME TAXES
The Company and its subsidiaries are included in the consolidated federal
income tax return filed by the parent Company. The Company and each of its
subsidiaries entered into a tax-sharing agreement with the parent Company under
which federal income taxes are computed by the Company and each of its
subsidiaries on a separate return basis. The current portion of such tax is
paid to the parent Company. During 1995 and 1994, the federal and state income
taxes paid by the Company were approximately $10,276,000 and $7,099,000,
respectively.
The Company's effective tax rate differs from the federal statutory rate
primarily due to state income taxes and percentage depletion.
For state income tax purposes (computed on a separate return basis), a certain
subsidiary has an operating loss carryforward of approximately $482,000 which
expires in 2006 through 2007.
-15-
<PAGE> 18
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE K--INCOME TAXES--continued
Provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Federal $ 8,795 $ 9,609
State 355 81
-------------- -------------
Total current tax expense $ 9,150 9,690
============== =============
Federal $ 1,399 $ (237)
State 291 28
-------------- -------------
Total deferred tax expense (benefit) $ 1,690 $ (209)
============== =============
</TABLE>
A summary of components of the net deferred tax assets (liabilities) included
in the accompanying consolidated balance sheets resulting from differences in
the book and tax bases of assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Current portion:
Accrued expenses and reserves $ 448 $ 470
Inventory (37) (37)
-------------- -------------
Total current $ 411 $ 433
============== =============
Long-term portion:
Depreciation, depletion and amortization $ (19,522) $ (20,395)
Pensions 5,714 5,476
Installment sales (928) (1,404)
Partnership investment (1,811) (1,818)
Deferred compensation 1,327 814
Other - net (3,936) (161)
-------------- -------------
Total long-term $ (19,156) $ (17,488)
============== =============
</TABLE>
The current portion of deferred income taxes shown above, a net deferred tax
asset, is included in other current assets in the accompanying consolidated
balance sheets.
-16-
<PAGE> 19
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
December 31, 1995 and 1994
NOTE L--DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure about the fair value of
financial instruments. Carrying amounts for cash and cash equivalents and
revolving credit approximate fair value. The fair value of notes receivable
and payable is estimated based on the discounted value of the future cash flows
using borrowing rates currently available to the Company for bank loans with
similar terms and average maturities. The fair value compared to the carrying
value are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Fair Value:
- -----------
Notes receivable $ 5,023 $ 5,875
Notes payable $ 29,367 $ 68,805
Carrying Value:
- ---------------
Notes receivable $ 3,790 $ 4,343
Notes payable $ 29,053 $ 62,538
</TABLE>
NOTE M--TRANSACTIONS WITH AFFILIATED COMPANIES
Costs and expenses include net receipts from the parent Company and other
subsidiaries of the parent Company. These receipts approximated $1,150,000 in
1995 and $1,387,000 in 1994 for administrative and other services.
The note receivable from parent Company of $14,939,000 in 1995 and $22,709,000
in 1994 is a demand note, with interest of 5.78% at December 31, 1995, and
5.87% at December 31, 1994.
-17-
<PAGE> 20
Exhibit 99(ii)
HAMILTON BEACH/PROCTOR-SILEX, INC.,
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994,
TOGETHER WITH AUDITORS' REPORT
<PAGE> 21
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1995 and 1994 2
Consolidated Statements of Operations for the Years Ended December 31, 1995 and 1994 3
Consolidated Statements of Changes in Stockholder's Equity for the Years Ended December 31, 1995 and 1994 4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1994 5
Notes to Consolidated Financial Statements as of December 31, 1995 and 1994 6 - 17
</TABLE>
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Hamilton Beach/Proctor-Silex, Inc.:
We have audited the accompanying consolidated balance sheets of Hamilton
Beach/Proctor-Silex, Inc. (a Delaware corporation), and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, changes in stockholder's equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hamilton Beach/Proctor-Silex,
Inc., and subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Richmond, Virginia,
January 29, 1996
- 1 -
<PAGE> 23
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 308 $ 2,307
Accounts receivable, net 70,193 76,279
Inventories, net 58,727 48,557
Deferred income taxes 2,085 1,492
Prepaid expenses and other 6,776 6,013
----------- ----------
Total current assets 138,089 134,648
PROPERTY, PLANT, AND EQUIPMENT, net 51,039 54,258
DEFERRED CHARGES AND INTANGIBLE ASSETS, net 95,750 96,244
DEFERRED INCOME TAXES 3,122 3,646
OTHER ASSETS 27 29
----------- ----------
Total assets $288,027 $288,825
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations $ 17,226 $ 12,730
Accounts payable 21,616 31,715
Other current liabilities 27,744 30,417
----------- ----------
Total current liabilities 66,586 74,862
----------- ----------
OTHER LIABILITIES 13,565 12,998
----------- ----------
LONG-TERM OBLIGATIONS:
Revolving credit agreements 65,000 70,000
Capital leases 542 596
----------- ----------
Total long-term obligations 65,542 70,596
----------- ----------
STOCKHOLDER'S EQUITY:
Common stock and paid-in capital, 100 shares authorized, issued, and outstanding
at $0.01 par value 149,268 149,268
Retained deficit (2,816) (14,568)
Minimum pension liability (2,521) (2,357)
Cumulative translation adjustment (1,597) (1,974)
----------- ----------
Total stockholder's equity 142,334 130,369
----------- ----------
Total liabilities and stockholder's equity $288,027 $288,825
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
- 2 -
<PAGE> 24
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
NET SALES $381,356 $377,517
COST OF SALES 318,968 317,509
--------- ---------
Gross profit 62,388 60,008
SELLING, ADMINISTRATIVE, AND GENERAL EXPENSES 34,293 31,491
--------- ---------
Operating profit 28,095 28,517
OTHER EXPENSE:
Interest 6,573 6,681
Amortization 3,683 4,018
Other, net 813 328
--------- ---------
Total other expense 11,069 11,027
--------- ---------
Income before income taxes 17,026 17,490
PROVISION FOR INCOME TAXES 5,274 7,293
--------- ---------
Net income $ 11,752 $ 10,197
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- 3 -
<PAGE> 25
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Dollars in Thousands, Other Than Par Value)
<TABLE>
<CAPTION>
COMMON
COMMON STOCK STOCK
-------------------- AND MINIMUM CUMULATIVE TOTAL
SHARES PAR PAID-IN RETAINED PENSION TRANSLATION STOCKHOLDER'S
OUTSTANDING VALUE CAPITAL DEFICIT LIABILITY ADJUSTMENT EQUITY
----------- ----- ------- -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1993 100 $1 $149,268 $ (7,085) $(2,265) $(1,358) $138,560
Minimum pension liability - - - - (92) - (92)
Net income - - - 10,197 - - 10,197
Cash dividends - - - (15,000) - - (15,000)
Translation adjustment - - - - - (616) (616)
Indemnity settlement and
other - - - (2,680) - - (2,680)
----- ----- -------- -------- -------- ------- --------
BALANCES, December 31, 1994 100 1 149,268 (14,568) (2,357) (1,974) 130,369
Minimum pension liability - - - - (164) - (164)
Net income - - - 11,752 - - 11,752
Translation adjustment - - - - - 377 377
----- ----- -------- -------- -------- ------- --------
BALANCES, December 31, 1995 100 $1 $149,268 $(2,816) $(2,521) $(1,597) $142,334
===== ===== ======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- 4 -
<PAGE> 26
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,752 $10,197
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation 12,156 11,494
Loss on disposal of fixed assets 599 187
Amortization 3,683 4,018
Deferred income taxes 38 (509)
Changes in assets and liabilities-
Decrease (increase) in:
Accounts receivable, net 6,086 2,968
Inventories, net (9,670) 3,224
Prepaid expenses and other (665) 539
Deferred charges and intangible assets (2,067) -
(Decrease) increase in:
Accounts payable (10,219) (3,402)
Other liabilities (2,569) 3,891
--------- ----------
Net cash provided by operating activities 9,124 32,607
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,549) (13,387)
Proceeds from sale of fixed assets 115 229
Acquisition of supplier (1,508) -
--------- ----------
Net cash used in investing activities (10,942) (13,158)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term obligations and revolving credit agreements (42,741) (86,209)
Borrowings under long-term obligations and revolving credit agreements 42,183 82,372
Dividends paid - (15,000)
Deferred financing costs paid - (362)
--------- ----------
Net cash used in financing activities (558) (19,199)
--------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 377 (616)
--------- ----------
Net decrease in cash and cash equivalents (1,999) (366)
CASH AND CASH EQUIVALENTS, beginning of year 2,307 2,673
--------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 308 $ 2,307
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- 5 -
<PAGE> 27
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
1. ORGANIZATION AND BUSINESS:
Hamilton Beach/Proctor-Silex, Inc. (the "Company"), designs, manufactures, and
sells small consumer electric appliances. The principal markets for the
Company's products are the United States and Canada. The Company's products
are sold primarily to retailers and distributors. The Company is a wholly
owned subsidiary of HB/PS Holdings, Inc. HB/PS Holdings, Inc., is owned 80
percent by NACCO Industries, Inc. ("NACCO"), and 20 percent by Glen Dimplex.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All intercompany transactions and balances have
been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks and highly liquid investments
with initial maturities of three months or less.
INVENTORIES, NET
Inventories are stated at the lower of cost or market. Cost has been
determined by the last-in, first-out ("LIFO") method for inventories accounted
for in the United States and under the first-in, first-out method for all other
inventories.
- 6 -
<PAGE> 28
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. All property, plant and
equipment is depreciated on a straight-line basis over estimated useful lives
of 40 years for buildings and 4 to 6 years for machinery and equipment. Assets
recorded under capital leases and leasehold improvements are amortized over the
lesser of their estimated useful lives or remaining lease terms on a
straight-line basis.
GOODWILL
Goodwill is being amortized on a straight-line basis over periods up to 40
years. The Company continually evaluates whether events and circumstances have
occurred subsequent to its acquisitions that indicate the remaining estimated
useful life of goodwill may warrant revision or that the remaining balance of
goodwill may not be recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an estimate of the
Company's undiscounted net income over the remaining life of the goodwill in
measuring whether the goodwill is recoverable.
PRODUCT DEVELOPMENT COSTS
Costs associated with the development of new products and changes to existing
products are charged to operations as incurred. These costs amounted to $3,304
and $2,742 for 1995 and 1994, respectively.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's foreign subsidiaries are translated at
current exchange rates, while income and expense items are translated at
average rates for the period. Translation gains and losses are reported as a
component of stockholder's equity.
PRODUCT LIABILITY
The Company is insured for product liability claims for amounts in excess of
established self-insured retention limits. Costs estimated to be incurred with
respect to product liability claims are accrued based on experience factors.
SELF-INSURANCE
The Company maintains a self-insurance program for health claims and a high
deductible insurance program for workers' compensation claims of all covered
employees. Losses are accrued based on the Company's estimate of future costs
that will be incurred for employee claims incurred prior to the balance sheet
date.
- 7 -
<PAGE> 29
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of financial instruments have been determined through
information obtained from quoted market sources and management estimates. The
Company does not hold or issue financial instruments or derivative financial
instruments for trading purposes.
The Company enters into forward foreign exchange contracts in order to hedge
certain foreign currency commitments. Gains and losses from these contracts
are deferred and recognized as part of the cost of the underlying transaction
being hedged.
The Company also enters into interest rate swap agreements with various terms
and maturity dates. The differential between the floating interest rate and
the fixed interest rate that is to be paid or received is recognized in
interest expense on a current basis.
RECLASSIFICATIONS
Certain amounts in the 1994 financial statements have been reclassified to
conform to the current year's presentation.
3. MERGER:
In 1990, Hamilton Beach, Inc., and Proctor-Silex, Inc., merged to form Hamilton
Beach/Proctor-Silex, Inc. Certain of the assets acquired and liabilities
assumed were subject to indemnification under the merger agreement. In March
1994, all outstanding claims for indemnification under the merger agreement
were resolved. The resolution of these matters resulted in a reduction of
goodwill and retained earnings of $2,676 in 1994.
4. ACQUISITION OF WHOLLY OWNED SUBSIDIARY:
On November 30, 1995, the Company acquired all of the outstanding stock of
Plasticos Sotec, S.A. de C.V. ("Sotec"), a Mexican supplier of molded plastic
parts, under the purchase method of accounting. The Company paid net cash of
$1,508 and assumed other liabilities of $350 for the stock and certain assets
of Sotec, plus acquisition costs. Prior to the acquisition, the Company paid
$2,650 to terminate the supplier manufacturing arrangement. The goodwill
associated with the acquisition of $1,814 and the amount paid to terminate the
supplier manufacturing arrangement are being amortized over a 25 month period.
5. ACCOUNTS RECEIVABLE, NET:
At December 31, accounts receivable consist of the following.
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accounts receivable $77,716 $83,642
Less- Allowance for returns, discounts, and adjustments (6,878) (6,168)
Allowance for doubtful accounts (645) (1,195)
------- -------
Accounts receivable, net $70,193 $76,279
======= =======
</TABLE>
- 8 -
<PAGE> 30
6. INVENTORIES, NET:
At December 31, inventories consist of the following.
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Raw materials $12,458 $12,261
Work in process 3,196 3,657
Finished goods 43,323 32,748
LIFO allowance (250) (109)
------- -------
Inventories, net $58,727 $48,557
======= =======
</TABLE>
As a result of changes in prices and liquidation of certain LIFO inventories,
operating profit decreased $141 and $549 for 1995 and 1994, respectively. The
cost of inventories stated under the LIFO method was 91 and 92 percent of the
value of total inventories at December 31, 1995 and 1994, respectively.
7. PROPERTY, PLANT, AND EQUIPMENT, NET:
At December 31, property, plant, and equipment (including capital leases)
consists of the following.
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land, buildings, and improvements $ 17,862 $ 16,727
Machinery and equipment 89,344 83,910
Construction work in process 5,231 5,652
---------- ----------
112,437 106,289
Less- Accumulated depreciation and amortization (61,398) (52,031)
---------- ----------
Property, plant, and equipment, net $ 51,039 $ 54,258
========== ==========
</TABLE>
8. DEFERRED CHARGES AND INTANGIBLE ASSETS, NET:
Goodwill amounted to $93,649 at December 31, 1995, net of accumulated
amortization, and is being amortized over periods up to 40 years on a
straight-line basis. Goodwill amortization expense amounted to $2,816 and
$2,756 for 1995 and 1994, respectively. Patents, trademarks, and other at
December 31, 1995, amounted to $1,323, net of accumulated amortization, and are
being amortized on a straight-line basis over their remaining lives. Total
amortization for 1995 and 1994 amounted to $284 and $437, respectively.
Deferred financing costs at December 31, 1995, amounted to $778, net of
accumulated amortization, and are being amortized on a straight-line basis over
the life of the amended and restated credit agreement (see Note 9).
Amortization expense related to deferred financing costs for 1995 and 1994 was
$583 and $825, respectively.
- 9 -
<PAGE> 31
9. REVOLVING CREDIT AGREEMENTS:
The Company has a bank credit facility (the "Agreement"), which includes a
revolving credit line and letter-of-credit facility of up to $135,000 through
May 1998. In April 1995, the Agreement was amended to provide a lower interest
rate and facility fee if the Company achieves certain interest coverage ratios
and to allow for interest rates to be quoted under a competitive bid option.
The maturity date of the Agreement may, upon mutual consent, be extended
annually for an additional year. As amended, the Agreement allows borrowings
to be made at either (i) the lender's prime rate plus 0.25 percent or (ii)
LIBOR plus 0.75 percent. Additionally, a facility fee of 0.50 percent per
annum times the committed amount of the credit facility is paid to the lender.
The borrowing margins and facility fee rates are subject to reductions based
upon the Company achieving certain predetermined interest coverage ratios.
During 1995, the Company received an average reduction of 0.66 percent on the
combined borrowing margin plus facility fee.
The Agreement is secured by substantially all of the Company's assets. The
Agreement includes certain covenants requiring, among other things, maintenance
of certain levels of (i) net worth, (ii) debt to total capital, and (iii)
interest coverage. At December 31, 1995, the Company was in compliance with
all financial covenants of the Agreement. The Company also has in place
uncommitted credit lines, which are secured through and subject to the
Agreement, and which allow for borrowings of up to $20,000 on a daily basis.
In addition, the Company has an unsecured, uncommitted credit line of $5,000.
During 1995 and 1994, total average borrowings outstanding under all debt and
credit agreements were $99,724 and $104,757, at a weighted-average interest
rate of 6.58 percent and 6.26 percent, respectively. In addition, at December
31, 1995 and 1994, outstanding obligations under letters of credit were $4,312
and $3,167, respectively.
At the option of Housewares Holding Company ("Housewares"), a wholly owned
subsidiary of NACCO, the Company may, subject to certain terms and conditions
of the Agreement, borrow up to $35,000 from Housewares. No borrowings were
outstanding during 1995 or 1994.
10. FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS:
INTEREST RATE DERIVATIVES
The primary objective of interest rate risk management is to minimize the
impact of interest rate fluctuations on the Company's cash flow and financial
results. The Company has entered into certain interest rate swap agreements to
swap floating rate for fixed rate interest payments. At December 31, 1995, the
notional amount on interest rate swap agreements expiring in March 1999 and
June 1999 was $50 million and $10 million, respectively, with the average
variable rate received and the average fixed rate paid during 1995 being 6.19
percent and 5.93 percent, respectively. At December 31, 1995, the aggregate
fair market value of the Company's interest rate swap agreements was $(809),
based on quoted market prices received from the Company's swap agreement
counter parties.
- 10 -
<PAGE> 32
FOREIGN CURRENCY DERIVATIVES
The Company enters into forward foreign exchange contracts for purposes of
hedging its exposure to foreign currency exchange rate fluctuations. These
contracts hedge primarily firm commitments and relate to the Canadian dollar.
At December 31, 1995, the Company had foreign currency contracts totaling
$3,800, with various expiration dates through March 15, 1996. The amount of
deferred gain associated with these contracts was not material.
All interest rate and foreign currency derivative agreements are with major
commercial banks; therefore, the risk of credit loss from nonperformance by the
banks is minimal. The Company evaluates its exposure to credit loss on an
ongoing basis.
11. CONCENTRATION OF CREDIT RISK:
The Company sells its products to retailers and distributors located primarily
in North America and, as a result, maintains significant receivable balances
with its major customers. The Company performs ongoing credit evaluations of
its customers' financial condition and generally requires no collateral from
its customers. In addition, the Company maintains allowances for potential
credit losses. The Company's five largest customers accounted for
approximately 46.4 percent and 40.1 percent of net sales in 1995 and 1994,
respectively, and approximately 47.0 percent and 40.1 percent of accounts
receivable at December 31, 1995 and 1994, respectively.
12. LEASES:
The Company leases certain facilities under noncancelable leases expiring at
various dates through 2021.
Plant and equipment under capital leases has been recorded as property, plant,
and equipment in the consolidated balance sheet, and the related amortization
is included with depreciation expense. At December 31, property, plant, and
equipment includes the following amounts relating to capital leases.
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Plant and equipment $9,323 $9,261
Less- Accumulated amortization (3,829) (3,299)
-------- ---------
$5,494 $5,962
======== =========
</TABLE>
Future minimum lease payments for capital leases as of December 31, 1995, are
as follows: 1996 - $156; 1997 - $122; 1998 - $84; 1999 - $79; 2000 - $74; and
thereafter - $760, and have a net present value of $651.
Future minimum lease payments for operating leases are as follows: 1996 -
$3,397; 1997 - $2,435; 1998 - $1,807; 1999 - $885; 2000 - $723; and thereafter
- - $1,164.
Rental expenses for operating leases amounted to $5,140 and $4,891 for 1995 and
1994, respectively.
- 11 -
<PAGE> 33
13. INCOME TAXES:
The Company is included in the consolidated Federal income tax return filed by
NACCO. The Company's tax sharing agreement with NACCO provides that Federal
income taxes are computed by the Company on a separate return basis, except
that net operating loss and tax credit carryovers that benefit the consolidated
tax return are advanced to the Company and are repaid as utilized on a separate
return basis. To the extent that these carryovers are not used on a separate
return basis, the Company is required, under conditions pursuant to the tax
sharing agreement, to refund to NACCO the balance of carryovers advanced and
not used by the Company.
The provision for income taxes consists of the following amounts.
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Current:
Federal $5,287 $5,915
State 644 348
Foreign 470 1,287
------ ------
Total current provision 6,401 7,550
------ ------
Deferred:
Federal (1,551) (840)
State 308 371
Foreign 116 212
------ ------
Total deferred benefit (1,127) (257)
------ ------
Total provision for income taxes $5,274 $7,293
====== ======
</TABLE>
A reconciliation of Federal statutory and effective income tax follows.
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Statutory taxes at 35% $5,959 $6,122
Effect of:
State taxes 619 467
Foreign taxes 182 368
Acquisition accounting adjustments 964 965
Foreign tax credits (2,784) -
General business credits - (240)
Other 334 (389)
-------- --------
Provision for income taxes $5,274 $7,293
======== ========
Effective rate 31.0% 41.7%
======== ========
</TABLE>
The foreign tax credit of $2,784 realized in 1995 resulted from repatriation of
virtually all prior earnings of the Canadian subsidiary. Such benefit is not
expected to recur in 1996.
- 12 -
<PAGE> 34
A summary of the deferred tax assets and (liabilities) that comprise the net
deferred tax balances in the accompanying consolidated balance sheets resulting
from differences in the book and tax bases of assets and liabilities is as
follows.
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Employee benefits $ 3,065 $ 3,698
Plant restructuring reserve 530 530
Environmental reserve 2,288 2,441
Product liability reserve 1,786 1,495
Net operating loss and tax credit carryovers 6,041 4,639
Other (1,125) 1,402
-------- --------
Total deferred tax assets 12,585 14,205
-------- --------
Deferred tax liabilities:
Advertising, sales, and inventory related reserves (3,120) (3,399)
Accelerated depreciation (4,258) (5,668)
-------- --------
Total deferred tax liabilities (7,378) (9,067)
-------- --------
Net deferred tax assets $ 5,207 $ 5,138
======== ========
</TABLE>
As of December 31, 1995, the Company had Federal net operating loss carryovers
of approximately $9,189, related to Hamilton Beach, Inc., and foreign tax
credit carryovers of $2,707. For Federal tax purposes, the utilization of
acquired net operating loss carryovers is limited to $1,953 on an annual basis,
with any unused limitation available for carryover to subsequent years. The
Company utilized $1,953 of the net operating loss carryovers related to
Hamilton Beach, Inc., in 1995. Loss carryovers are scheduled to expire in the
years 2002 and 2003, and foreign tax credit carryovers are scheduled to expire
in the years 1996 to 2000. As of December 31, 1995, the Company has recorded a
deferred tax asset of $5,923 associated with these carryforwards. Realization
of the asset is dependent on generating sufficient taxable and foreign source
income prior to expiration of the carryforwards. The amount of the deferred
tax asset considered realizable could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced. Although
realization is not assured, the Company fully expects to realize its deferred
tax assets. As a result, the Company has no valuation allowances as of
December 31, 1995 and 1994.
No provision has been made for Federal income taxes on undistributed earnings
of foreign subsidiaries of approximately $1,704 as of December 31 1995, as any
future remittances are expected to be substantially tax free.
- 13 -
<PAGE> 35
14. RETIREMENT BENEFIT PLANS:
The Company sponsors a defined benefit plan, the Hamilton Beach/Proctor-Silex,
Inc., Profit Sharing Retirement Plan (the "Plan"). All full-time hourly and
salaried U.S. employees are eligible to participate in the Plan. The Plan
provides that participants accrue benefits annually based on age and annual
earnings. Upon retirement, participants will receive their account balance
under the Plan plus all frozen accrued benefits earned under previous benefit
plans. Benefits will be paid upon retirement at age 65 or at age 55 if the
employee has at least ten years of service. Participants become fully vested
after five years of service. The Company's funding policy is to contribute
each year an amount that satisfies the minimum required contribution but does
not exceed the maximum tax deductible contribution. Also, the Company may make
additional contributions to the Plan, dependent upon the Company achieving
certain profit and performance objectives. In 1995 and 1994, the Company
accrued $433 and $293, respectively, representing the estimated amount of
profit sharing to be contributed to the Plan in the subsequent year. The
Company contributed $1,658 and $1,234 to the Plan for the plan years ended
December 31, 1995 and 1994, respectively. Assets held by the Plan consist
mainly of common stocks, corporate and government bonds, and cash and cash
equivalents.
The details of the components of net pension expense for the years ended
December 31, 1995 and 1994, are as follows.
<TABLE>
<CAPTION>
1995 1994
-------- ------
<S> <C> <C>
Service cost $1,179 $1,249
Interest cost on projected benefit obligation 2,597 2,366
Actual return on assets (5,373) 340
Net amortization and deferral 3,036 (2,481)
-------- ------
Net pension expense $1,439 $1,474
======== ======
</TABLE>
Actuarial factors used in accounting for the Plan as of December 31, 1995 and
1994, are as follows.
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Weighted-average discount rate 7.50% 8.50%
Long-term rate of return on assets 9.00% 9.00%
Rate of increase in compensation levels:
Salaried 4.50% 5.50%
Hourly 4.50% 5.00%
</TABLE>
- 14 -
<PAGE> 36
The funded status of the Plan and amounts recognized in the Company's
consolidated balance sheets as of December 31, 1995 and 1994, are as follows.
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested accumulated benefit obligation $33,329 $27,768
Nonvested accumulated benefit obligation 1,346 1,019
--------- ---------
Total accumulated benefit obligation 34,675 28,787
Value of future salary projections 976 758
--------- ---------
Total projected benefit obligation 35,651 29,545
Fair value of plan assets 29,570 24,162
--------- ---------
Projected benefit obligation in excess of plan assets (6,081) (5,383)
Unrecognized net transition asset (6) (6)
Unrecognized net loss 4,882 4,383
Unrecognized prior service cost 10 39
Unrecognized basis change - (20)
Additional minimum liability (4,116) (3,846)
--------- ---------
Pension liability recognized in balance sheet at
December 31, 1995 and 1994
$(5,311) $(4,833)
========= =========
</TABLE>
Statement of Financial Accounting Standards ("SFAS") No. 87, "Employers'
Accounting for Pensions", requires the Company to recognize a minimum pension
liability equal to the unfunded accumulated benefit obligation ("ABO"). At
December 31, 1995 and 1994, the cumulative unfunded ABO was $5,311 and $4,833,
respectively. The Company recorded an adjustment that recognized an additional
minimum liability equal to the unfunded ABO. In accordance with SFAS 87, the
portion of the unfunded ABO in excess of unrecognized prior service cost was
charged directly to stockholder's equity and is separately presented in the
consolidated statements of changes in stockholder's equity.
The Company also has a defined contribution retirement savings plan (401(k))
covering substantially all of its full-time United States employees. Effective
July 1, 1995, the Company began matching employee contributions to the plan at
the rate of 50 percent, up to the first 2 percent of employee contributions.
The Company maintains a postretirement health care plan for all retirees who
retired prior to October 1, 1992. In addition, the Company provides life
insurance benefits to all retirees who retired prior to October 1, 1992,
assuming they reached certain age and service requirements while working for
the Company. Under the Company's current policy, plan benefits are funded at
the time they are due to participants. The plan has no assets.
- 15 -
<PAGE> 37
15. RELATED-PARTY TRANSACTIONS:
The Company sells merchandise to The Kitchen Collection, Inc. ("Kitchen
Collection"), a wholly owned subsidiary of Housewares. The Company's sales to
Kitchen Collection were $5,030 and $5,907 for 1995 and 1994, respectively.
Accounts receivable due from Kitchen Collection at December 31, 1995 and 1994,
amounted to $361 and $1,151, respectively, and are included in accounts
receivable.
NACCO incurs certain administrative and other expenses directly related to the
operation of the Company. These expenses are reimbursed to NACCO. The Company
expensed and paid $627 and $494 of these administrative expenses to NACCO in
1995 and 1994, respectively. The related payable to NACCO was $73 and $61 at
December 31, 1995 and 1994, respectively.
16. CONTINGENCIES:
In 1992, a former distributor for the Company filed suit seeking to recover
damages for alleged breach of contract by the Company. In the fourth quarter
of 1994, a judgment was entered against the Company. In the first quarter of
1995, the Court set aside the judgment. The claimant has filed an appeal.
Various legal proceedings and claims have been or may be asserted against the
Company relating to the conduct of its business, including product liability
and environmental claims. These proceedings and claims are incidental to the
Company's ordinary course of business. Management believes that it has
meritorious defenses and will vigorously defend itself in these actions. Any
costs that management estimates may be paid as a result of these proceedings or
claims are accrued when the liability is considered probable and the amount can
be reasonably estimated. Although the ultimate disposition of these
proceedings and claims is not presently determinable, management believes,
after consultation with its General Counsel, the likelihood that material costs
will be incurred in excess of accruals already recognized is remote.
17. INDUSTRY SEGMENT AND FOREIGN OPERATIONS:
The Company designs, manufactures, and sells small consumer electric
appliances. Net sales to one major customer totaled 22.5 percent in 1995 and
18.1 percent in 1994.
The Company has operations in the United States, Mexico, and Canada. Products
are transferred between these geographic areas at the market value of the
products. Identifiable assets are those assets identified with the operations
in each geographic area at year-end. All deferred charges and intangible
assets are attributed to the United States.
Eliminations include amounts for intercompany sales, intercompany profits in
inventory, and intercompany investments.
- 16 -
<PAGE> 38
The following table presents sales, operating profit, and other financial
information by geographic area for 1995 and 1994.
<TABLE>
<CAPTION>
UNITED
STATES CANADA MEXICO ELIMINATIONS CONSOLIDATED
------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1995:
Net sales $361,749 $41,795 $ 9,508 $(31,696) $381,356
Sales and transfers between
geographic areas 22,608 - 9,088 (31,696) -
Operating profit 27,195 1,230 167 (497) 28,095
Depreciation 8,932 32 3,192 - 12,156
Identifiable assets 260,240 13,625 17,359 (3,197) 288,027
Capital expenditures 7,732 109 1,708 - 9,549
1994:
Net sales $321,390 $43,021 $13,106 $ - $377,517
Sales and transfers between
geographic areas 23,983 - 11,023 (35,006) -
Operating profit 25,326 2,551 988 (348) 28,517
Depreciation 8,585 52 2,857 - 11,494
Identifiable assets 266,523 14,124 9,709 (1,531) 288,825
Capital expenditures 11,196 20 2,171 - 13,387
</TABLE>
18. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments during 1995 and 1994 included interest of $6,762 and $6,523 and
income taxes of $11,771 and $2,138, respectively.
19. RECENTLY ISSUED ACCOUNTING STANDARDS:
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement
is effective for financial statements for fiscal years beginning after December
15, 1995. The Statement requires, among other things, that certain long-lived
and identifiable intangible assets be reviewed to determine whether or not an
impairment of the asset has occurred. The Company intends to adopt the
Statement in 1996 and does not believe that its adoption will have a material
impact on the Company's financial position or results of operations.
- 17 -
<PAGE> 39
EXHIBIT 99(iii)
THE KITCHEN COLLECTION, INC.
----------------------------
FINANCIAL STATEMENTS
--------------------
AS OF DECEMBER 31, 1995 AND 1994
--------------------------------
TOGETHER WITH AUDITORS' REPORT
------------------------------
<PAGE> 40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors and Stockholder of
The Kitchen Collection, Inc.:
We have audited the accompanying balance sheets of THE KITCHEN COLLECTION, INC.
(a Delaware corporation) as of December 31, 1995 and 1994, and the related
statements of income, changes in stockholder's equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Kitchen Collection, Inc.
as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Columbus, Ohio,
January 26, 1996.
<PAGE> 41
THE KITCHEN COLLECTION, INC.
----------------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1995 AND 1994
--------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ------------- -------------
<S> <C> <C>
Current assets:
Cash $ 130,405 $ 170,305
Miscellaneous receivables 175,179 227,706
Accounts receivable - affiliate 1,950,000 3,125,000
Inventories 14,270,155 14,389,205
Prepaid expenses and other 1,608,637 1,434,092
------------- -------------
Total current assets 18,134,376 19,346,308
------------- -------------
Property, plant and equipment:
Land 61,300 61,300
Building and leasehold improvements 866,459 816,693
Furniture and fixtures 6,376,292 5,170,775
Construction in progress 77,500 -
------------- -------------
7,381,551 6,048,768
Less: Accumulated depreciation and amortization (4,142,388) (3,330,760)
------------- -------------
Property, plant and equipment, net 3,239,163 2,718,008
Goodwill, net of accumulated amortization 3,731,536 3,846,648
------------- -------------
Total assets $ 25,105,075 $ 25,910,964
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Accounts payable and miscellaneous accrued liabilities $ 5,253,026 $ 7,565,527
Accounts payable - affiliates 151,330 207,221
Income taxes payable to affiliate 1,015,720 1,077,360
Accrued salaries and benefits 1,183,603 1,148,298
Other accrued taxes 733,632 771,570
------------- -------------
Total current liabilities 8,337,311 10,769,976
Long-term debt 5,000,000 5,000,000
------------- -------------
Total liabilities 13,337,311 15,769,976
------------- -------------
Stockholder's equity:
Common stock; $.01 par value; 100,000 shares authorized;
10,500 shares issued and outstanding 105 105
Additional paid-in capital 4,999,890 4,999,890
Retained earnings 6,767,769 5,140,993
------------- -------------
Total stockholder's equity 11,767,764 10,140,988
------------- -------------
Total liabilities and stockholder's equity $ 25,105,075 $ 25,910,964
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
<PAGE> 42
THE KITCHEN COLLECTION, INC.
----------------------------
STATEMENTS OF INCOME
--------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net sales $ 69,588,640 $ 63,870,305
Cost of sales 40,048,483 36,253,909
------------ ------------
Gross margin 29,540,157 27,616,396
Selling, general, administrative and other expenses 26,102,350 22,091,402
------------ ------------
Operating income 3,437,807 5,524,994
Interest expense 505,848 204,623
Amortization expense 131,183 125,943
------------ ------------
Income before provision for income taxes 2,800,776 5,194,428
Provision for income taxes 1,174,000 2,079,000
------------ ------------
Net income $ 1,626,776 $ 3,115,428
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE> 43
THE KITCHEN COLLECTION, INC.
----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
---------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
<TABLE>
<CAPTION>
Additional Total
Number of Common Paid-in Retained Stockholder's
Shares Stock Capital Earnings Equity
------ --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 10,500 $ 105 $ 4,999,890 $7,625,565 $12,625,560
Net income - - - 3,115,428 3,115,428
Dividend to stockholder - - - (5,600,000) (5,600,000)
------ --------- ----------- ---------- -----------
Balance, December 31, 1994 10,500 105 4,999,890 5,140,993 10,140,988
Net income - - - 1,626,776 1,626,776
------ --------- ----------- ---------- -----------
Balance, December 31, 1995 10,500 $ 105 $ 4,999,890 $6,767,769 $11,767,764
====== ========= =========== ========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE> 44
THE KITCHEN COLLECTION, INC.
----------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,626,776 $3,115,428
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,025,093 899,510
Loss on the disposal of assets 26,090 12,249
(Increase) decrease in miscellaneous receivables 52,527 (149,530)
(Increase) decrease in inventories 119,050 (3,030,855)
Increase in prepaid expenses and other (174,545) (226,650)
Increase (decrease) in accounts payable and miscellaneous
accrued liabilities (2,312,501) 2,389,141
Decrease in accounts payable - affiliates (55,891) (222,400)
Increase (decrease) in income taxes payable to affiliate (61,640) 205,820
Increase in accrued salaries and benefits 35,305 229,964
Increase (decrease) in other accrued taxes other than income (37,938) 59,506
---------- ----------
Net cash provided by operating activities 242,326 3,282,183
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (1,459,676) (1,016,915)
Proceeds from disposal of assets 2,450 19,941
---------- ----------
Net cash used in investing activities (1,457,226) (996,974)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt - (2,400,000)
Borrowings of long-term debt - 5,000,000
Dividend to stockholder - (5,600,000)
Net repayments on loan to affiliate 1,175,000 875,000
---------- ----------
Net cash provided by (used in) financing activities 1,175,000 (2,125,000)
---------- ----------
</TABLE>
(Continued on next page)
<PAGE> 45
- 2 -
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH $ (39,900) $ 160,209
CASH, beginning of the year 170,305 10,096
------------ ------------
CASH, end of the year $ 130,405 $ 170,305
============ ============
Supplemental Disclosure of Cash Flow Information:
- -------------------------------------------------
Cash paid during the year for:
Interest $ 560,133 $ 210,593
Income taxes $ 1,446,353 $ 1,969,894
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE> 46
THE KITCHEN COLLECTION, INC.
----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995 AND 1994
--------------------------
(1) ORGANIZATION
------------
The Kitchen Collection, Inc. (the Company) is a specialty retailer of
kitchenware, tableware, small electrical appliances and related
accessories. The Company operates a chain of 134 retail and factory
outlet stores and is a wholly-owned subsidiary of NACCO Industries, Inc.
(NII).
(2) SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
Inventories
-----------
Inventories are stated at the lower of cost or market as determined by
the retail inventory method.
Building, Leasehold Improvements, Furniture and Fixtures
--------------------------------------------------------
Building, leasehold improvements, furniture and fixtures are stated at
cost. Expenditures for maintenance and repairs are charged to operations
as incurred. For financial reporting purposes, depreciation and
amortization is provided using the straight-line method based upon the
estimated useful lives of the related assets, as follows:
Building and leasehold improvements 5-20 years
Furniture and fixtures 5 years
Goodwill
--------
Goodwill is associated with the purchase of the Company by NII and is
being amortized over forty years on a straight-line basis. Accumulated
amortization was $872,934 and $757,822 at December 31, 1995 and 1994,
respectively, with related amortization expense of $115,112 for the years
ended December 31, 1995 and 1994, respectively. Management regularly
evaluates its accounting for goodwill considering such factors as
historical and future profitability and believes that the asset is
realizable and the amortization period remains appropriate.
<PAGE> 47
- 2 -
Income Taxes
------------
Deferred tax assets or liabilities are based on the difference between
the financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rate. Deferred income tax expense or
benefit is based on the changes in the assets or liabilities from period
to period, refer to Note 5 "Income Taxes" for additional information.
Fair Value of Financial Instruments
-----------------------------------
The Company enters into interest rate swap agreements with terms that run
concurrent with the related debt. The differential between the floating
interest rate and the fixed interest rate, which is to be paid or
received, is recognized in interest expense as interest rates change over
the life of the related debt agreement.
The fair values of financial instruments have been determined through
information obtained from quoted market sources and management estimates.
The fair value of the financial instruments approximated their carrying
values at December 31, 1995. The Company does not hold or issue
financial instruments or derivative financial instruments (interest rate
swap agreements) for trading purposes.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities 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.
(3) LINE-OF-CREDIT AGREEMENT
------------------------
The Company has an unsecured revolving line-of-credit agreement with a
commercial bank for $5,000,000. Interest accrues at the bank's prime
rate, money market rate or LIBOR rate plus a base rate margin of .425% to
1.25%, as determined by certain performance measures. The Company had no
funds drawn against the available balance at December 31, 1995 or 1994.
The credit agreement expires on May 31, 1998.
<PAGE> 48
- 3 -
(4) LONG-TERM DEBT
--------------
Long-term debt consists of the following, as of December 31:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Note payable to bank at 7.81% at December 31, 1995
and 7.56% at December 31, 1994 $5,000,000 $5,000,000
=========== ==========
</TABLE>
On May 10, 1994, the Company entered a term note agreement with a
commercial bank for $5,000,000. Interest is payable quarterly at 6.81%,
plus a base rate margin between .75% and 1.75%, determined by certain
performance measures. The note is unsecured and is payable in two even
annual installments on January 15, 1999 and 2000.
The note contains restrictive covenants regarding maintenance of minimum
net worth, interest coverage and leverage. The Company was in compliance
with all covenants as of December 31, 1995 and 1994.
The Company entered into an interest rate swap agreement with a six year
term during 1994. The use of this agreement allowed the Company to enter
into a long-term credit agreement with a performance based, floating rate
of interest and then swap it for a fixed rate as opposed to entering into
a higher cost fixed-rate credit agreement. This agreement is with a
major commercial bank; therefore, the risk of credit loss from
nonperformance by the bank is minimal. The following summarizes the
notional amount and related rates on this interest rate swap agreement at
December 31, 1995:
<TABLE>
<S> <C>
Notional amount $5,000,000
Average variable rate received 6.9%
Average fixed rate paid 7.7% (7.81% at December 31, 1995)
</TABLE>
<PAGE> 49
- 4 -
(5) INCOME TAXES
------------
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ----------
<S> <C> <C>
Currently payable:
Federal $ 988,000 $1,779,000
State and local 234,000 383,000
------------ ----------
1,222,000 2,162,000
------------ ----------
Deferred:
Federal (32,000) (78,000)
State and local (16,000) (5,000)
------------ ----------
(48,000) (83,000)
------------ ----------
Total provision $ 1,174,000 $2,079,000
============ ==========
</TABLE>
The components of the net deferred income tax benefit are as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Store closing reserve $ - $ (14,000)
Uniform capitalization of inventory (36,000) (54,000)
Tax over book depreciation 7,000 49,000
Vacation pay (19,000) (14,000)
Medical cost (47,000) (59,000)
State income taxes 63,000 18,000
Other (16,000) (9,000)
------------ ------------
Total deferred income tax benefit, net $ (48,000) $ (83,000)
============ ============
</TABLE>
Reconciliation of the Federal statutory and effective income tax rates is
as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Federal statutory rate 35.0% 35.0%
Amortization of goodwill 1.4 0.8
State and local income tax, net of Federal income
tax effect 5.8 4.8
Other (0.3) (0.6)
------------ ------------
Effective tax rate 41.9% 40.0%
============ ============
</TABLE>
<PAGE> 50
- 5 -
A summary of the components of the net deferred tax asset balances,
included in the accompanying balance sheet in prepaid expenses and other,
are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Inventories $ 224,000 $ 188,000
Accrued expenses and reserves 230,000 149,000
State income taxes (62,000) 1,000
Depreciation (220,000) (214,000)
--------- ---------
Deferred tax asset, net $ 172,000 $ 124,000
========= =========
</TABLE>
(6) RELATED PARTY TRANSACTIONS
--------------------------
Net purchases of inventories from Hamilton Beach/Procter Silex (HBPS), a
related company during the years ended December 31, 1995 and 1994, were
$5,467,375 and $6,083,151, respectively. Related inventory levels at
December 31, 1995 and 1994, were approximately $2,359,000 and $2,286,000,
respectively. At December 31, 1995 and 1994, the Company owed HBPS
$126,179 and $196,421, respectively, for these purchases.
The Company incurred $87,913 and $19,600 for miscellaneous services
provided by NII for the years ended December 31, 1995 and 1994,
respectively. The Company had payables for such services at December 31,
1995 and 1994, of $25,151 and $10,800, respectively.
The Company has an agreement with NII to loan NII up to $15,000,000.
Outstanding amounts are collectible on demand. Interest is payable
quarterly at the applicable short-term federal rate. The Company has a
receivable due from NII at December 31, 1995 and 1994 of $1,950,000 and
$3,125,000, respectively. The Company recorded related interest income
of $20,209 during 1995 and $71,036 during 1994.
The Company has a tax sharing agreement with NII, as NII and the Company
are included in the same consolidated group for Federal tax purposes.
The Company files separate tax returns for state and local tax purposes.
The Company has recorded taxes payable to NII at December 31, 1995 and
1994, of $1,015,720 and $1,077,360, respectively.
<PAGE> 51
- 6 -
(7) LEASES
------
The Company leases retail stores, warehouse space and equipment under
noncancellable operating leases which expire at various dates through
2003. Future minimum lease payments are as follows:
<TABLE>
<S> <C>
1996 $ 5,540,000
1997 5,138,000
1998 4,435,000
1999 3,554,000
2000 2,387,000
Thereafter 1,239,000
-----------
Total minimum payments $22,293,000
===========
</TABLE>
The Company has leases with percentage of sales clauses in all but two of
its retail store locations. Percentage of sales rent expense amounted to
$375,144 for the year ended December 31, 1995 and $443,072 for the year
ended December 31, 1994. The Company's total rent expense for the years
ended December 31, 1995 and 1994, was $7,759,326 and $6,429,710,
respectively.
(8) RETIREMENT INCOME PLANS
-----------------------
The Company maintains a defined contribution savings plan for employees,
who have completed one year of service and are at least 21 years of age.
Employees can elect to defer and contribute a portion of their salary,
following the guidelines established in the plan. The Company makes
matching contributions of 50% of the employee's contribution, limited to
3% of the employee's compensation. In addition, the Company can make an
annual profit sharing contribution at its discretion.
Effective January 1, 1995, the Company established a deferred
compensation plan for management employees. The purpose of the plan is to
provide for certain employees of the Company benefits they would have
received under the retirement savings plan but for certain limitations
imposed by the INTERNAL REVENUE CODE. The plan is administrated and the
related assets are held by the Company. Earnings are accrued by the
Company based upon return on equity, as defined by the plan. The assets
of the plan are unsecured.
The Company's matching contribution, profit sharing contribution and
earnings accrued on the plans described above was $317,613 and $319,958
for the years ended December 31, 1995 and 1994, respectively.
<PAGE> 52
- 7 -
Effective December 20, 1995, the Company established a deferred
compensation plan for participants in the retirement savings plan not
included in the deferred compensation plan for management employees. The
purpose of the plan is to provide for certain employees of the Company
benefits they would have received under the retirement savings plan but
for certain limitations imposed by the INTERNAL REVENUE CODE. The plan
is administrated and the related assets are held by the Company.
Earnings shall be accrued by the Company based upon the earnings of the
retirement savings plan, as defined by the plan. The assets of the plan
shall be unsecured. As of December 31, 1995, there are no participants
nor has the Company incurred any expense with relation to this plan.
(9) COMMITMENT
----------
On November 9, 1995, the Company entered into a construction contract
with an unrelated third party for improvements to the home office in the
amount of $700,800. Completion of the project is expected in 1996.
(10) SELF INSURANCE COVERAGE
-----------------------
The Company is self insured for health insurance with stop loss coverage
for claims which exceed $45,000 per incident. Total expense for
1995 and 1994 was approximately $649,000 and $571,000, respectively.
(11) SUBSEQUENT EVENTS
-----------------
Through January 26, 1996, the Company made additional advances to NII of
$1,145,000 and received payments of $2,445,000, for a net receivable
balance of $650,000 at January 26, 1996.
On January 8, 1996, the Company entered into an agreement with an
unrelated third party for the sale, purchase and leaseback of the home
office building . The selling price is $1,200,000, which approximates
the net book value of the building after considering the cost of
improvements described in Note 9. The Company has entered into an
operating lease for a 10 year initial term, with two five-year renewal
options, at a monthly rate of $14,500.
<PAGE> 53
Exhibit 99(iv)
NACCO MATERIALS HANDLING GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
TOGETHER WITH AUDITORS' REPORT
<PAGE> 54
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
Nacco Materials Handling Group, Inc.:
We have audited the accompanying consolidated balance sheets of Nacco Materials
Handling Group, Inc. (an indirect majority-owned subsidiary of NACCO
Industries, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nacco Materials Handling
Group, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Portland, Oregon
February 15, 1996
<PAGE> 55
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF DECEMBER 31, 1995 AND 1994
--------------------------------
(in thousands of dollars except share amounts)
<TABLE>
<CAPTION>
ASSETS
------
1995 1994
---------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 25,777 $ 10,763
Accounts receivable, net 194,406 141,232
Inventories 286,085 208,828
Prepaid expenses and other 5,338 17,358
Deferred income taxes 2,714 5,192
---------- --------
514,320 383,373
---------- --------
OTHER ASSETS 13,360 10,808
PROPERTY, PLANT AND EQUIPMENT, net 148,347 125,616
DEFERRED CHARGES:
Goodwill, net 367,670 373,076
Other 8,462 13,376
---------- --------
376,132 386,452
---------- --------
Total Assets $1,052,159 $906,249
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 212,164 $176,332
Short-term obligations 78,621 3,120
Current maturities of long-term obligations 3,265 45,577
Accrued expenses 89,028 80,617
Accrued income taxes 2,197 12,189
Deferred income taxes 1,793 4,034
---------- --------
387,068 321,869
---------- --------
LONG-TERM OBLIGATIONS, net of current maturities 250,000 211,417
OTHER LIABILITIES 56,293 48,281
DEFERRED INCOME TAXES 17,844 18,756
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share; 10,000 shares
authorized; 5,599 shares outstanding 6 6
Capital in excess of par value 198,205 198,205
Retained income 131,887 98,395
Foreign currency translation adjustment 12,810 10,511
Pension liability adjustment and other (1,954) (1,191)
---------- --------
340,954 305,926
---------- --------
Total Liabilities and Stockholders' Equity $1,052,159 $906,249
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE> 56
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
NET SALES $1,510,106 $1,178,882
COST OF SALES 1,231,695 947,375
---------- ----------
Gross Profit 278,411 231,507
---------- ----------
OPERATING EXPENSES:
Selling, administrative and general expenses 181,754 154,846
Goodwill amortization 10,844 10,844
---------- ----------
192,598 165,690
---------- ----------
Operating profit 85,813 65,817
OTHER INCOME (EXPENSE):
Interest income 923 792
Interest expense (30,593) (33,744)
Other, net 2,238 2,951
---------- ----------
(27,432) (30,001)
---------- ----------
Income before income taxes and extraordinary
charge 58,381 35,816
PROVISION FOR INCOME TAXES 21,490 17,077
---------- ----------
INCOME BEFORE EXTRAORDINARY CHARGE 36,891 18,739
EXTRAORDINARY CHARGE, NET OF TAX
(3,399) (3,219)
---------- ----------
Net income $ 33,492 $ 15,520
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 57
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 33,492 $ 15,520
Adjustments to reconcile net income to net
cash provided by (used for) operating activities-
Extraordinary charge, net of tax 2,161 1,022
Depreciation and amortization 31,791 32,226
Deferred income taxes (1,162) 7,196
Other 5,944 1,105
Changes in operating assets and liabilities:
Accounts receivable (48,642) (29,492)
Inventories (73,543) (51,586)
Prepaid expenses and other 5,381 (1,713)
Accounts payable and accrued expenses 29,332 71,550
Accrued income taxes (9,147) (9,740)
--------- --------
Net cash provided by (used for) operating
activities (24,393) 36,088
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (39,432) (25,939)
Acquisition of subsidiary (5,780) -
Proceeds from sale of assets 650 7,928
Other 1,097 (486)
--------- --------
Net cash used for investing activities (43,465) (18,497)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term obligations 2,529 1,378
Reduction of long-term obligations (219,650) (96,217)
Revolving credit facility, net 212,935 33,000
Short-term obligations, net 73,060 (7,753)
Working capital financing, net 10,805 11,884
Capital contribution - 25,000
Capital grants 4,017 1,622
Other (1,567) (60)
--------- --------
Net cash provided by (used for) financing
activities 82,129 (31,146)
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 743 4,063
--------- --------
CASH AND CASH EQUIVALENTS:
Increase(decrease) for the year 15,014 (9,492)
Balance at the beginning of the year 10,763 20,255
--------- --------
Balance at the end of the year $ 25,777 $ 10,763
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 58
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
COMMON STOCK $ 6 $ 6
-------- --------
CAPITAL IN EXCESS OF PAR VALUE:
Beginning balance 198,205 173,205
Capital contribution - 25,000
-------- --------
198,205 198,205
-------- --------
RETAINED INCOME:
Beginning balance 98,395 82,875
Net income 33,492 15,520
-------- --------
131,887 98,395
-------- --------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT:
Beginning balance 10,511 2,503
Foreign currency translation adjustment 2,299 8,008
-------- --------
12,810 10,511
-------- --------
PENSION LIABILITY ADJUSTMENT AND OTHER (1,954) (1,191)
-------- --------
TOTAL STOCKHOLDERS' EQUITY $340,954 $305,926
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 59
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1995 AND 1994
--------------------------
1. ACCOUNTING POLICIES:
--------------------
Basis of Presentation
- ---------------------
The accompanying consolidated financial statements of NACCO Materials Handling
Group, Inc. and subsidiaries includes the accounts of NACCO Materials Handling
Group, Inc. and subsidiaries and its parent Hyster-Yale Materials Handling,
Inc., a holding company (collectively, the Company). Hyster-Yale Materials
Handling, Inc. is a 97 percent owned subsidiary of NACCO Industries, Inc.
(NACCO). NACCO Materials Handling Group, Inc. and subsidiaries is the primary
operating business.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Hyster-Yale
Materials Handling, Inc. and NACCO Materials Handling Group, Inc. and its
majority-owned domestic and international subsidiaries except for Companhia
Hyster, a Brazilian subsidiary. Income from this Brazilian subsidiary is
recognized when cash is received in the form of a dividend. Investments in
Sumitomo Yale Company, Ltd. (S-Y), a 50% owned joint venture, and Yale
Financial Services, Inc. (YFS, Inc.), a 20% owned joint venture, are accounted
for by the equity method. All significant intercompany accounts and
transactions among the consolidated companies are eliminated in consolidation.
Cash and Cash Equivalents
- -------------------------
The Company considers cash equivalents to be investments purchased with a
maturity of three months or less.
Inventories
- -----------
Inventories are stated at the lower of cost or market. Cost has been
determined under the last-in, first-out (LIFO) method for domestic inventories
and under the first-in, first-out (FIFO) method with respect to all other
inventories. Costs for inventory valuation include labor, material and
manufacturing overhead.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are recorded at cost. Depreciation of plant and
equipment is computed using the straight-line method over the estimated useful
service lives for purposes of financial reporting. For tax purposes, an
accelerated method is generally used. Maintenance and repairs are expensed as
incurred.
Goodwill
- --------
Goodwill, the excess of the purchase price paid over the fair value of the net
assets acquired, relates primarily to the 1989 acquisition of Hyster Company
and is amortized on a straight-line basis over 40 years. Amortization was
$10.8 million in each of 1995 and 1994. Accumulated amortization was $71.2
million and $60.4 million at December 31, 1995 and 1994, respectively.
Management regularly evaluates its accounting for goodwill considering such
factors as historical and future profitability and believes that the asset is
realizable and the amortization period is still appropriate.
<PAGE> 60
-2-
Product Development Costs
- -------------------------
Expenditures associated with the development of new products and improvements
to existing products are expensed as incurred. These costs amounted to $24.2
and $23.2 million in 1995 and 1994, respectively.
Foreign Currency
- ----------------
The financial statements for the Company's foreign operations are translated
into United States dollars at year-end exchange rates as to assets and
liabilities and at weighted average exchange rates as to revenues and expenses.
Gains and losses that do not impact cash flows are excluded from net income.
Effects of changes in exchange rates on foreign financial statements are
designated as "foreign currency translation adjustment" as a separate component
of stockholders' equity.
Financial Instruments and Derivative Financial Instruments
- ----------------------------------------------------------
The fair values of financial instruments have been determined through
information obtained from quoted market sources and management estimates. The
Company does not hold or issue financial instruments or derivative financial
instruments for trading purposes.
The Company enters into forward foreign exchange contracts with terms of one to
twelve months. These contracts hedge certain foreign currency denominated
receivables and payables and foreign currency commitments. Gains and losses on
contracts which do not hedge firm commitments are reported currently in income,
while gains and losses from contracts related to firm commitments are deferred
and recognized as part of the cost of the underlying transaction being hedged.
The Company also enters into interest rate swap agreements with terms ranging
from three months to seven years. The differential between the floating
interest rate and the fixed interest rate which is to be paid or received is
recognized in interest expense as the floating interest rate changes over the
life of the agreement.
Reclassification
- ----------------
Certain amounts in the prior period consolidated financial statements have been
reclassified to conform to the current period's presentation.
2. RISKS AND UNCERTAINTIES:
------------------------
Nature of Operations
- --------------------
The Company designs, manufactures and markets material handling machinery and
equipment. Its product offerings cover all categories of forklift trucks, with
electric rider and internal combustion engine (ICE) forklift trucks being the
major product lines. The Company also derives significant revenue from the
sale of service parts for its own and competitors' forklift trucks.
The Company's manufacturing operations are primarily located in the United
States and Europe. Products are differentiated between the Hyster(R) and
Yale(R) brands and each brand is distributed worldwide through a separate
dealer network. Both brands are also sold directly to certain national
accounts customers.
The Company's market position is strongest in North America; it also has
significant presence in Europe although its competitive position varies from
country to country. The Company's market share in Asia-Pacific is relatively
low. That region, including China and Japan, is one focus of the Company's
growth strategy.
<PAGE> 61
-3-
Since 1983, Yale products have been distributed in Germany and Austria
exclusively by Jungheinrich AG. Yale also supplies forklift trucks to
Jungheinrich for distribution under the Jungheinrich brand in other areas of
Europe. In late 1995, the existing agreement between Yale and Jungheinrich was
terminated and an orderly transition plan was agreed upon. In 1996, Yale will
be establishing a new distribution network in Germany and Austria.
The forklift truck industry is highly competitive and the Company has
established alliances with a limited number of suppliers to secure sources of
competitively priced materials and components. If the supply of key components
or materials were disrupted, or if major price increases were imposed that
could not be passed onto end customers, there could be an adverse impact on the
Company's operating results.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities
and the disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
3. EXTRAORDINARY CHARGES:
----------------------
The 1995 extraordinary charge of $3.4 million, net of $2.2 million in tax
benefits, represents premiums and the write-off of unamortized debt issuance
costs associated with the retirement of the remaining approximately $78
million, 12-3/8% subordinated debentures that were outstanding at December 31,
1994. The Company retired these debentures in August 1995 utilizing proceeds
from the Credit Agreement, as discussed in Note 10.
The 1994 extraordinary charge of $3.2 million, net of $2.0 million in tax
benefits, related to the retirement of approximately $72 million of
subordinated debentures.
4. SUPPLEMENTAL CASH FLOW INFORMATION:
-----------------------------------
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Interest paid $33,723 $36,078
Income taxes paid 30,239 15,434
Income tax refunds received 2,213 1,336
Noncash activities:
Capital contribution of
subordinated debentures - 25,529
</TABLE>
5. ACCOUNTS RECEIVABLE:
--------------------
Allowances for doubtful accounts of $3.8 and $3.3 million at December 31, 1995
and 1994, respectively, were deducted from accounts receivable.
<PAGE> 62
-4-
6. INVENTORIES:
------------
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Finished goods and service parts $117,393 $ 82,331
Raw materials and work in process 182,032 137,897
LIFO reserve (13,340) (11,400)
-------- --------
$286,085 $208,828
======== ========
</TABLE>
The cost of inventories has been determined by the last-in first-out (LIFO)
method for 61% of such inventories as of December 31, 1995 and 63% as of
December 31, 1994.
7. INVESTMENTS:
------------
The Company owns a 50% interest in Sumitomo Yale, Ltd. (S-Y). The joint
venture operates a facility in Japan from which the Company purchases certain
components, internal combustion engines and electric forklift trucks.
Following is S-Y's unaudited condensed financial information on a separate
company basis, before elimination of intercompany profits.
Condensed Balance Sheets
- ------------------------
<TABLE>
<CAPTION>
November 30,
------------------
1995 1994
-------- --------
(in thousands)
(unaudited)
<S> <C> <C>
Assets:
Current assets $144,966 $115,003
Other assets 57,209 52,617
-------- --------
$202,175 $167,620
======== ========
Liabilities and stockholders' equity:
Notes payable $ 55,700 $ 50,706
Other current liabilities 95,898 77,264
-------- --------
Total current liabilities 151,598 127,970
Other liabilities 36,320 29,853
Stockholders' equity 14,257 9,797
-------- --------
$202,175 $167,620
======== ========
</TABLE>
<PAGE> 63
-5-
Condensed Statements of Income
- ------------------------------
<TABLE>
<CAPTION>
Twelve Months Ended
November 30,
-------------------
1995 1994
-------- --------
(in thousands)
(unaudited)
<S> <C> <C>
Net sales $280,853 $215,180
Gross profit 71,322 51,497
Net income 4,865 758
</TABLE>
The Company's purchases from S-Y in 1995 and 1994 were $134.4 and $92.0
million, respectively. Trade terms on certain payables to S-Y are 210 days.
The Company pays interest at market rates on all amounts owing after 60 days.
Payables to S-Y with terms greater than 60 days are shown as working capital
financing in the consolidated statements of cash flows. The Company's accounts
receivable and accounts payable balances with S-Y were as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Accounts receivable $ 895 $ 775
Accounts payable 51,696 40,891
</TABLE>
The Company reimbursed S-Y $1.4 and $1.5 million for engineering assistance
during 1995 and 1994, respectively.
8. PROPERTY, PLANT AND EQUIPMENT:
------------------------------
Property, plant and equipment includes the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- --------
(in thousands)
<S> <C> <C>
Land $ 6,421 $ 6,007
Buildings 58,503 51,551
Machinery, tools and equipment 192,137 156,888
--------- --------
257,061 214,446
Less: Accumulated depreciation (108,714) (88,830)
--------- --------
$ 148,347 $125,616
========= ========
</TABLE>
Depreciation charged to income was $20.2 and $19.9 million in 1995 and 1994,
respectively.
<PAGE> 64
-6-
9. ACCRUED EXPENSES:
-----------------
The components of accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Wages, commissions and bonuses $13,105 $13,393
Interest 3,107 6,821
Warranty 16,708 12,539
Self insurance 8,000 8,000
Sales discounts 12,104 9,472
Other 36,004 30,392
------- -------
$89,028 $80,617
======= =======
</TABLE>
10. SHORT-TERM AND LONG-TERM OBLIGATIONS:
-------------------------------------
On February 28, 1995 the Company entered into a long-term financing agreement
(the Credit Agreement) to refinance the majority of its previously outstanding
long-term debt. The Credit Agreement provides the Company with an unsecured
$350 million revolving line of credit with a five year maturity and an
extension option. It is the Company's intention to exercise the extension
option at maturity. The Credit Agreement also provides the Company with
reduced interest rates upon achievement of certain financial performance
targets. The Credit Agreement allowed the Company to redeem $78 million of
12-3/8% subordinated debentures that were outstanding at December 31, 1994.
This redemption caused the Company to record an extraordinary charge of $3.4
million, net of tax, in 1995 to write-off unamortized debt issuance costs and
premiums as discussed in Note 3.
Borrowings under the Credit Agreement were $275 million at December 31, 1995,
of which $246 million is classified as long-term and the remainder as
short-term obligations. A facility fee which is based upon the total $350
million commitment of the Credit Agreement is currently 0.3% per annum. This
facility bears interest under a variety of borrowing options with premiums on
each option subject to reductions based on favorable performance. The weighted
average effective interest rates on the revolving credit facility, including
interest rate swaps, was 6.25% in 1995. The weighted average interest rate,
including interest rate swaps, at December 31, 1995 was 6.68%.
The Credit Agreement contains covenants related to minimum net worth, debt to
equity ratios and debt of subsidiaries. In addition, the Credit Agreement
limits capital spending, investments and dividends. As of December 31, 1995,
the Company was in compliance with all the covenants in the Credit Agreement.
In addition to the Credit Agreement, the Company has arrangements with lenders
that allow for borrowings on an uncommitted basis at current market rates. At
December 31, 1995, borrowings under these arrangements amounted to $43.4
million and are classified as short-term obligations. The weighted average
interest rate on these borrowings at December 31, 1995 was 6.41%.
As further discussed in Note 15 to the consolidated financial statements, the
Company has entered into unsecured interest rate swap agreements. The interest
rate swap agreements mature at varying lengths from three months to seven years
and effectively change the majority of the Company's floating interest rate
exposure on the Credit Agreement to a fixed rate. The Company evaluates its
exposure to floating rate debt on an ongoing basis.
<PAGE> 65
-7-
Long-term obligations, exclusive of current maturities, consists of the
following:
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Revolving lines of credit $245,935 $ 33,000
Term note - 95,298
Subordinated debentures - 78,524
Other 4,065 4,595
-------- --------
Total long-term obligations $250,000 $211,417
======== ========
</TABLE>
Maturities on long-term obligations for the next five years are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ --------------
(in thousands)
<S> <C>
1996 $1,927
1997 410
1998 190
1999 52
2000 52
</TABLE>
To the extent allowed under the restrictive covenants of the Credit Agreement,
foreign subsidiaries had credit lines at December 31, 1995 with an unused
amount of $26.5 million. Borrowings under these credit lines are classified as
short-term and amounted to $6.2 million and $3.1 million at December 31, 1995
and 1994, respectively. These credit lines are in various currencies and bear
interest at rates that range from 7.75% to 8.4% at December 31, 1995.
11. INCOME TAXES:
-------------
The Company is included in the consolidated federal income tax return of NACCO.
The Company and NACCO are parties to an income tax sharing agreement providing
for the allocation of federal income tax liabilities. Under this arrangement,
the Company will pay to NACCO an amount equal to the income taxes that would be
payable by the Company if it were a corporation filing a separate return.
Therefore, the currently payable federal portion of the provision for income
taxes is payable to NACCO. The Company files separate state income tax
returns.
Components of income before income taxes and extraordinary charge are as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Domestic $35,305 $17,694
International 23,076 18,122
------- -------
$58,381 $35,816
======= =======
</TABLE>
<PAGE> 66
-8-
Income tax expense (credit) consists of the following:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Current:
Federal $17,814 $ 9,808
State 3,650 2,212
Foreign 3,767 6,460
------- -------
25,231 18,480
------- -------
Deferred:
Federal (3,570) 2,487
State (1,394) (560)
Foreign 1,223 (3,330)
------- -------
(3,741) (1,403)
------- -------
$21,490 $17,077
======= =======
</TABLE>
The Company has provided for estimated United States and foreign income taxes,
less available tax credits and deductions, which would be incurred on the
remittance of undistributed earnings in its foreign subsidiaries in excess of
earnings deemed to be indefinitely reinvested. It is management's intent to
provide income taxes on all future accumulations of undistributed earnings for
those foreign subsidiaries where it is anticipated that distribution of
earnings is likely to occur.
Accumulated earnings at December 31, 1995 of international subsidiaries which
have been deemed to be indefinitely reinvested totaled $38.5 million.
Determination of the amount of unrecognized deferred tax liability on these
unremitted earnings is not practicable. The amount of withholding taxes that
would be payable upon remittance of all undistributed foreign earnings would be
$5.6 million. These withholding taxes, subject to certain limitations, may be
used to reduce U.S. income taxes.
In 1995, the Company reached agreements with various tax authorities resulting
in nonrecurring tax benefits of $1.8 million.
<PAGE> 67
-9-
A reconciliation of the provisions for income taxes at the federal statutory
income tax rate to income taxes as reported is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Income before tax and extraordinary item $58,381 $35,816
Statutory rate 35% 35%
Tax at statutory rate $20,433 $12,536
Effect of:
Amortization of excess purchase price 4,085 4,085
State income taxes 1,391 1,038
Export benefit (969) (903)
Income recorded net of tax (1,174) (373)
Tax authorities settlement (1,792) -
Other differences (484) 694
------- -------
Tax Provision $21,490 $17,077
======= =======
</TABLE>
A summary of the components of the net deferred tax balance in the Company's
consolidated balance sheets resulting from differences in the book and tax
basis of assets and liabilities follows:
Deferred Tax Asset (Liability) at December 31, 1995 (in thousands)
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
Current Noncurrent
------------------ ------------------
Domestic Foreign Domestic Foreign
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Inventories $(17,775) $ 1,058 $ - $ -
Accrued expenses and reserves 12,594 1,737 - -
Pension - - (1,158) (2,427)
Net operating loss carryforwards 460 1,723 - -
Product liability 3,112 14,717 -
Tax credit carryforwards 56 - - -
Unrepatriated earnings - - (11,642) -
Depreciation - - (13,267) (5,247)
Other (240) (1,804) 1,210 (30)
-------- ------- -------- -------
$ (1,793) $ 2,714 $(10,140) $(7,704)
======== ======= ======== =======
</TABLE>
<PAGE> 68
-10-
Deferred Tax Asset (Liability) at December 31, 1994 (in thousands)
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
Current Noncurrent
------------------ ------------------
Domestic Foreign Domestic Foreign
-------- ------- -------- -------
<S> <C> <C> <C>
Inventories $(18,555) 593 $ - $ -
Accrued expenses and reserves 8,922 4,858 - -
Pension - - 563 (2,575)
Net operating loss carryforwards 1,144 820 - -
Product liability 3,120 - 13,722 -
Tax credit carryforwards 2,334 - - -
Unrepatriated earnings - - (8,904) -
Depreciation - - (13,454) (5,449)
Other (999) (1,079) (2,701) 42
-------- ------- -------- -------
$ (4,034) $ 5,192 $(10,774) $(7,982)
======== ======= ======== =======
</TABLE>
12. POSTRETIREMENT BENEFITS:
------------------------
The Company maintains a variety of postretirement plans covering a majority of
its employees. A portion of the employees are participants in the defined
benefit plans discussed below. Most of the remaining covered employees
participate in the profit sharing portion of the Company's defined contribution
plan also described below. In addition, all eligible employees are included in
the 401(k) portion of the defined contribution plan. Total postretirement
expense for the Company was $12.1 million and $8.5 million for the years 1995
and 1994, respectively. Included in these amounts is the expense associated
with government sponsored plans in which the Company's international
subsidiaries participate. Cash contributions under the above plans were $7.8
million in 1995 and $7.2 million in 1994.
Each defined benefit plan has a formula which is used to determine benefits
upon retirement. Most formulas take into account age, compensation, and
success of the Company in meeting certain goals, although certain hourly
employees' formulas are based primarily on years of service. The Company's
current funding policy is to contribute annually the minimum contribution
calculated by the independent actuaries. Contributions are intended to provide
not only for benefits attributed to service to date but also for those expected
to be earned in the future.
<PAGE> 69
-11-
The components of periodic pension cost and actuarial assumptions for the
Company's principal defined benefit plans for the years ended December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
UNITED STATES PLANS:
Interest accrued on projected benefit obligation $ 3,098 $ 2,504
Service cost-benefits earned during the year 3,693 1,558
Actual return on plan assets, net of plan expense (5,333) 239
Net amortization and deferral 3,622 (1,568)
------- -------
Net periodic pension cost $ 5,080 $ 2,733
------- -------
Assumed discount rate 7.5% 8.5%
Rate of compensation increase (where applicable) 4.5% 5.5%
Expected long-term rate of return on plan assets 9.0% 9.0%
UNITED KINGDOM PLANS:
Interest accrued on projected benefit obligation $ 2,122 $ 1,830
Service cost-benefits earned during the year 1,256 1,356
Actual return on plan assets, net of plan expense (3,397) (185)
Net amortization and deferral 648 (2,743)
------- -------
Net periodic pension cost $ 629 $ 258
------- -------
Assumed discount rate 8.0% 8.0%
Rate of compensation increase (where applicable) 5.0% 5.0%
Expected long-term rate of return on plan assets 9.5% 9.5%
</TABLE>
<PAGE> 70
-12-
The following schedule reconciles the funded status of the Company's principal
defined benefit plans with amounts reported in the consolidated balance sheets
at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1995 1994
------------------- -----------------------
United United United United
States Kingdom States Kingdom
Plans Plans Plans Plans
------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Projected benefit obligation, based on employment service to date
and current salary levels:
Vested accumulated benefit obligation $34,912 $26,261 $24,218 $22,991
Nonvested accumulated benefit obligation 1,027 1,758 2,023 195
------- ------- ------- -------
Total accumulated benefit obligation 35,939 28,019 26,241 23,186
Additional amounts related to projected
salary increase 6,781 978 5,429 2,438
------- ------- ------- -------
Total projected benefit obligation 42,720 28,997 31,670 25,624
Fair value of plan assets 29,533 33,286 22,922 29,352
------- ------- ------- -------
Plan assets in excess of (less than) projected
benefit obligation (13,187) 4,289 (8,748) 3,728
Unrecognized net loss from past experience
different from that assumed 6,323 - 4,507 1,583
Unrecognized prior service cost 2,685 1,312 3,076 1,359
Unrecognized net transition obligation - 109 - (578)
Additional minimum liability (4,523) - (3,975) -
------- ------- ------- -------
Prepaid (accrued) pension cost recognized $(8,702) $ 5,710 $(5,140) $ 6,092
======= ======= ======= =======
</TABLE>
The Company maintains a defined contribution retirement plan for U.S. employees
which includes a profit sharing portion and a 401(k) portion. Contributions to
the profit sharing plan are based on a formula which takes into account age,
compensation, and success of the Company in meeting certain goals.
Contributions vest over a five-year period. Under the 401(k) portion, eligible
employees may contribute up to 17% of their compensation and the Company
matches an amount equal to 66-2/3% of the participants' initial 3% before tax
contribution. Participants are at all times fully vested in their
contributions and those made by the Company.
<PAGE> 71
-13-
13. OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
-------------------------------------------------
The Company maintains health care and life insurance plans which provide
benefits to eligible retired employees. The Company funds these benefits on a
"pay as you go" basis, with the retirees paying a portion of the costs.
Summary information on the Company's plans is as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees $ 4,452 $ 3,866
Fully eligible active plan participants 326 214
Other active plan participants 5,577 5,422
------- -------
10,355 9,502
Unrecognized net loss (2,483) (1,648)
------- -------
Accrued postretirement benefit $ 7,872 $ 7,854
======= =======
</TABLE>
The components of net periodic other postretirement benefit cost are as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Service cost of benefits earned $ 167 $ 187
Interest cost on accumulated postretirement benefit
obligation 790 800
Amortization of unrecognized loss 74 197
------- -------
$ 1,031 $ 1,184
======= =======
</TABLE>
The assumed health care cost trend rate for measuring the postretirement
benefit cost was 9% in 1995 and 10.00% in 1994, gradually reducing to 6.25% in
years 2001 and after. The weighted average discount rate used to determine the
benefit obligation was 7.50% in 1995 and 8.50% in 1994. If the assumed health
care trend rate were increased by 1.00%, the effect on the APBO and expense
would be immaterial.
14. LONG-TERM INCENTIVE COMPENSATION PLAN:
--------------------------------------
The Company has a Long-Term Incentive Compensation Plan for officers and key
management employees of the Company and its subsidiaries. Awards under this
plan represent book value appreciation units and entitle the recipient, subject
to vesting and other restrictions, to receive cash equal to the difference
between the base period price for the units and the book value price as of the
quarter date coincident to or immediately preceding the date of disbursement.
Awards vest and are payable ten years from date of grant or earlier under
certain conditions. As of December 31, 1995, 1.9 million units have been
awarded to key employees and officers. The amount charged to expense was $3.2
and $1.7 million in 1995 and 1994, respectively. The total amount accrued at
December 31, 1995 and 1994 for these awards was $5.2 and $2.0 million,
respectively, and was recorded as a long-term liability.
<PAGE> 72
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15. FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS:
-----------------------------------------------------------
Financial Instruments
- ---------------------
A financial instrument is cash or a contract that imposes, or conveys, a
contractual obligation, or right, to deliver, or receive, cash or another
financial instrument. The fair value of financial instruments approximated
their carrying values at December 31, 1995.
Interest Rate Derivatives
- -------------------------
The Company has entered into interest rate swap agreements. The use of these
agreements allows the Company to enter into long-term credit arrangements that
have performance based, floating rates of interest and then swap them into
fixed rates as opposed to entering into higher cost fixed-rate credit
arrangements. These agreements are with major commercial banks; therefore, the
risk of credit loss from nonperformance by the banks is minimal. As of
December 31, 1995 the Company had $320 million notional principal amount of
interest rate swaps with an average effective fixed rate of 6.08%, although
$110 million of the swaps are delayed to start in 1996 and later.
Foreign Currency Derivatives
- ----------------------------
The Company enters into forward foreign exchange contracts for purposes of
hedging exposure to foreign currency exchange rate fluctuations. These
contracts are with major financial institutions and the risk of credit loss
from nonperformance by these institutions is considered minimal. These
contracts hedge primarily firm commitments and, to a lesser degree, anticipated
commitments relating to cash flows associated with sales and purchases
denominated in foreign currencies. The Company enters into foreign exchange
contracts in a variety of foreign currencies with maturities not exceeding one
year. At December 31, 1995 the Company had $293 million contract value of
forward foreign exchange contracts.
16. COMMITMENTS:
------------
Future minimum lease payments on operating leases as of December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
Operating
Leases
--------------
(in thousands)
<S> <C>
1996 $ 6,318
1997 5,678
1998 5,481
1999 5,084
2000 4,574
Subsequent to 2000 9,947
-------
Total Future Minimum Lease Payments $37,082
=======
</TABLE>
Aggregate rental expense for operating leases included in the consolidated
statements of income was $6.5 and $4.0 million in 1995 and 1994, respectively.
<PAGE> 73
-15-
17. CONTINGENCIES:
--------------
The Company is subject to recourse or repurchase obligations under various
financing arrangements for certain independently owned retail dealerships.
Also, certain dealer loans are guaranteed by the Company. Total amounts
subject to recourse, guarantee or repurchase obligation at December 31, 1995
were $100.8 million.
When the Company is the guarantor of the principal amount financed, a security
interest is usually maintained in assets of the parties for whom the Company is
guaranteeing debt. Losses anticipated under the terms of the recourse or
repurchase obligations have been provided for and are not significant.
The Company is the defendant in various product liability and other legal
proceedings incidental to its business. The majority of this litigation
involves product liability claims. The Company has recorded a reserve for
potential product liability losses at December 31, 1995 of $45.8 million, of
which $8.0 million is estimated to be payable in 1996. While the resolution of
litigation cannot be predicted with certainty, management believes that the
reserves are adequate and no material adverse effect upon the financial
position or results of operations of the Company will result from such legal
actions.
18. SEGMENT INFORMATION:
--------------------
The Company's business consists of the engineering, manufacturing and marketing
of materials handling machinery and equipment, under the Hyster(R) and Yale(R)
trade names. The Company's products are manufactured in plants at five
locations in the United States and six international plants located in
Scotland, Northern Ireland, The Netherlands, Brazil, Australia and Japan.
Service parts are distributed through parts depots located in the United
States, Europe, Australia and Brazil. Generally, product assembled abroad is
comprised of parts and components manufactured or purchased locally and from
U.S. plants at established transfer prices. The transfer price of production
parts and completed units is established by a procedure designed to equate to
an arm's-length price. However, for purposes of the following financial
statement disclosure, transfers between geographic areas are presented at
standard cost.
<TABLE>
<CAPTION>
North Asia
1995 America Europe Pacific Eliminations Consolidated
- --------------------------------------- ---------- -------- ------- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 936,600 $422,308 $85,136 $ - $1,444,044
Export sales to unaffiliated customers 66,062 - - - 66,062
Transfers between geographic areas 63,653 156,050 - (219,703) -
---------- -------- ------- --------- ----------
Total net sales $1,066,315 $578,358 $85,136 $(219,703) $1,510,106
========== ======== ======= ========= ==========
Operating profit $ 51,095 $ 34,437 $ 281 $ 85,813
========== ======== ======= ==========
Identifiable assets $ 650,426 $373,437 $48,139 $ (19,843) $1,052,159
========== ======== ======= ========= ==========
</TABLE>
<PAGE> 74
-16-
<TABLE>
<CAPTION>
North Asia
1994 America Europe Pacific Eliminations Consolidated
- --------------------------------------- ---------- -------- ------- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 753,179 $289,692 $61,045 $ - $1,103,916
Export sales to unaffiliated customers 74,966 - - - 74,966
Transfers between geographic areas 49,208 130,595 - (179,803) -
---------- -------- ------- --------- ----------
Total net sales $ 877,353 $420,287 $61,045 $(179,803) $1,178,882
========== ======== ======= ========= ==========
Operating profit $ 45,577 $ 15,073 $ 5,167 $ 65,817
========== ======== ======= ==========
Identifiable assets $ 583,036 $309,578 $24,026 $ (10,391) $ 906,249
========== ======== ======= ========= ==========
</TABLE>
