Exhibit 10.11
THE NORTH AMERICAN COAL CORPORATION
VALUE APPRECIATION PLAN FOR
YEARS 2000 TO 2009
(AS AMENDED AND RESTATED AS OF JANUARY 1, 2005)
1. PURPOSE OF THE PLAN
The purpose of this Value Appreciation Plan ("VAP" or the "Plan") is to
further the long-term profits and growth of The North American Coal Corporation
(the "Company") by offering long-term incentive to those officers and key
management employees of the Company and its Subsidiaries who will be in a
position to make significant contributions to such profits or growth. This
incentive is in addition to annual compensation and is intended to reflect
growth in the value of the Company.
2. AMERICAN JOBS CREATION ACT (AJCA)
(a) Due to the ability of the Committee to reduce the vested amounts
previously credited to a Participant's VAP Account hereunder (as specified in
Sections 5.3 and 8 of the Plan), none of the amounts that are credited to a
Participant's VAP Account are "grandfathered" under Code Section 409A (as
enacted by the AJCA). As such, all amounts payable under the Plan are subject to
the provisions of Code Section 409A, as enacted by the AJCA. It is intended that
the Plan be administered in accordance with the requirements of Code Section
409A, so as to prevent the inclusion in gross income of any amount credited to a
Participant's VAP Sub-Account hereunder in a taxable year that is prior to the
taxable year or years in which such amounts would otherwise actually be
distributed or made available to the Participant.
2. DEFINITIONS
(a) "Account" means the account established in accordance with Section 7
hereof to reflect the Participant's interest under the Plan.
NA Coal VAP/Jobs Act Restatement
(b) "Award" means an award of a VAP Amount under the provisions of the
Plan.
(c) Committee" shall mean the Compensation Committee of the Company's
Board of Directors appointed to administer the Plan in accordance with
Section 3.
(d) "Current Projects" shall mean the Company's existing projects, such as
Coteau, Falkirk, Sabine, Red River Mining, Mississippi Lignite Mining,
San Miguel, Florida Dragline Operations, and interest income from
notes receivable.
(e) "New Projects" shall mean any new mining activities or projects, such
as the Dos Republicas Project, the Jayamkondam Project (India), Guney
Ege Enerji Project (Turkey), expansions at current operations, and
other new projects and activities.
(f) "Plan Term" shall mean the ten (10) year period from January 1, 2000
through December 31, 2009.
(g) "Salary Grade" shall mean the salary grade assigned to a Plan
Participant by the Company.
(h) "Subsidiary" shall mean any corporation, partnership or other entity
the majority of the outstanding voting securities of which is owned,
directly or indirectly, by the Company.
(i) "Value Appreciation" shall mean an amount equal to after-tax net
income less a capital charge which is ten percent (10%) of the book
value of the entity.
(j) "VAP Amount" shall mean a Plan Participant's VAP Target Amount times a
VAP Multiplier, as determined in accordance with Section 8.
(k) "VAP Goals for Current Projects" shall mean the expected Value
Appreciation for the Company and its Subsidiaries over the Plan Term
as determined by the Committee.
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(l) "VAP Goal for New Projects" shall be the cumulative amount of Value
Appreciation to be obtained over the Plan Term from New Projects, as
determined by the Committee.
(m) "VAP Multiplier" shall mean a factor based on VAP Ratio as further
described herein.
(n) "VAP Percentage" shall mean a percentage of the Plan Participant's
salary range midpoint, and shall be determined for each Plan
Participant by the Committee.
(o) "VAP Ratio" shall mean a factor determined based on actual performance
versus VAP Goals as further described herein.
(p) "VAP Target Amount" shall mean (i) a dollar amount equal to the VAP
Percentage for a Plan Participant's Salary Grade times the Plan
Participant's salary range midpoint or (ii) such amount as otherwise
determined by the Committee.
(q) "VAP Targets for New Projects" shall mean those targets calculated
based on the expected capital investment and income projections that
are used, in good faith as realistic best estimates, to obtain
Management approval of the New Project.
(r) "Disability" or "Disabled." A Participant shall be deemed to have a
"Disability" or be "Disabled" if the Participant is determined to be
totally disabled by the Social Security Administration or if the
Participant (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected
to last for a continuous period of not less than twelve months, or
(ii) is, by reason of any medically determinable physical or mental
impairment which can be expected
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to result in death or can be expected to last for a continuous period
of not less than twelve months, receiving income replacement benefits
for a period of not less than three months under an employer-sponsored
accident and health plan.
(s) "Key Employee" shall mean a key employee, as defined in Section 416(i)
of the Code (without regard to paragraph (5) thereof) of the Company
or a Subsidiary (or related entity) so long as the stock of NACCO
Industries, Inc. (or a related entity) is publicly traded on an
established securities market or otherwise on the date of the
Employee's Separation From Service. Key Employees are identified on a
controlled group-wide basis and include non-resident alien employees
(whether or not such employees are eligible to participate in the
Plan). The selected identification date for Key Employees is December
31st. As such, any employee who is classified by the Company as a Key
Employee as of December 31st of a particular Plan Year shall maintain
such classification for the 12-month period commencing the following
April 1st. The Company shall have the sole and absolute discretion to
classify employees as Key Employees hereunder. To the extent
determined by the Company, such classification may include up to 75
highly compensated employees (including some who do not meet the
statutory requirements of a Key Employee) as long as such
determination is made in a consistent, reasonable and good faith
manner.
(t) "Separation From Service" means a separation of service as defined in
Code Section 409A (and the regulations and guidance issued
thereunder).
(u) "Unforeseeable Emergency" shall mean an event which results in a
severe financial hardship to the Participant as a consequence of (i)
an illness or accident
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of the Participant, the Participant's spouse or a dependent within the
meaning of Code Section 152(a), (ii) loss of the Participant's
property due to casualty or (iii) other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant.
3. ADMINISTRATION
This Plan shall be administered by the Committee. The Committee shall have
complete authority to interpret all provisions of this Plan consistent with law,
to prescribe the form of any instrument evidencing any Award granted under this
Plan, to adopt, amend and rescind general and special rules and regulations for
its administration, and to make all other determinations necessary or advisable
for the administration of the Plan. All acts and decisions of the Committee with
respect to any questions arising in connection with the administration and
interpretation of this Plan, including the severability of any or all of the
provisions hereof, shall be conclusive, final and binding upon the Company and
all present and former Participants, all other employees of the Company and its
Subsidiaries, and their respective descendants, successors and assigns. No
member of the Committee shall be liable for any such act or decision made in
good faith.
4. ELIGIBILITY
Any person who is classified as a salaried employee of the Company or any
Subsidiary (including any Subsidiary acquired after adoption of this Plan)
generally at a Salary Grade no lower than 16, who in the judgment of the
Committee occupies an officer or other key management position in which his
efforts may significantly contribute to the profits or growth of the Company or
Subsidiary may receive an Award under this Plan. Directors of the Company or any
Subsidiary who are not also classified as employees of the Company or any
Subsidiary are
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not eligible to participate in this Plan. Any person receiving an Award shall be
referred to as a "Participant."
5. VAP AMOUNTS
5.1 Awards. As to each Award under this Plan, the Committee shall determine
and approve (a) the VAP Target Amount that may be awarded for each Salary Grade,
(b) the employees to whom VAP Amounts are to be awarded and (c) the VAP Amount
to be awarded to each individual employee. All Awards under this Plan shall be
effective as of January 1 of the year determined by the Committee. Each Award
shall vest and the amount represented thereby shall be payable upon the terms
and conditions set forth in Section 5.2.
5.2 Vesting; Payment of VAP Amounts.
(a) Each Participant's interest in his VAP Account under this Plan shall
vest at the rate of 20 percent for each year following the effective date of the
Participant's initial Award under this Plan during which the Participant remains
in the continuous employ of the Company or a Subsidiary; provided, however, a
Participant's interest in his VAP Account shall vest 100 percent in the event
(i) of such Participant's death or Disability while employed by the Company or a
Subsidiary, (ii) such Participant remains in the continuous employ of the
Company or a Subsidiary through December 31, 2009, or (iii) of such
Participant's termination of employment with the Company or Subsidiary at or
after age 55 with at least 10 years of service or at or after age 65 (i.e.,
retirement). Notwithstanding the foregoing, all payments under this Plan must be
approved by the Committee (even after vesting). Subject to the provisions of
Section 5.2(f) and Section 5.3, the vested amounts in a Participant's VAP
Account, including any Award for the year 2009, shall be payable as soon as
practicable following approval thereof by the Committee and following the
earlier to occur of:
(i) December 31, 2009;
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(ii) the date of a Participant's Separation From Service for death,
Disability or retirement (as defined above); provided, however,
that if the Participant is a Key Employee, such payment shall be
delayed for a period of six months following retirement (with
interest continuing to accrue until the actual payment date); or
(iii) the termination of this Plan pursuant to Section 9, to the
extent permitted by Code Section 409A.
Notwithstanding the foregoing, the Committee may vest a Participant whose
employment otherwise terminates in such amounts, up to 100 percent of his VAP
Account, as the Committee may in its sole discretion determine; provided that
such vesting shall not result in the acceleration of the payment thereof to a
date earlier than the dates specified above.
(b) In the event that all or any portion of a Participant's VAP Account
does not vest pursuant to Section 5.2(a), the VAP Amount represented thereby
shall terminate and be forfeited.
(c) As soon as practicable following Committee approval following the
payment dates specified above, the Company or Subsidiary shall deliver to the
Participant or, if applicable, his designated beneficiaries (or, if none, his
estate) a check in full payment of the amount represented by the Participant's
vested interest in his VAP Account. The employer by which the Participant was
last employed prior to the payment date of an Award shall be liable for the
payment of such Award to or on behalf of such Participant, but such employer's
liability shall be limited to its proportionate share of such amount, as
hereinafter provided. If the Award(s) payable to or on behalf of a Participant
are based on the Participant's employment with more than one employer, the
liability for such Awards shall be shared by all such employers (by
reimbursement to the employer making such payment(s)) as determined by the
Company (taking into consideration the Participant's service and compensation
paid by each such employer) and as will permit the deduction (for purposes of
federal and foreign income tax) by each such employer of its portion of the
payments made and to be made hereunder. Expenses of
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administering the Plan shall be paid by the Company and the Subsidiaries, as
directed by the Company.
(d) The amounts payable under this Plan shall be calculated as of a
valuation date determined by the Committee, and in the absence of such
determination, shall be calculated based on the value of the VAP Account as of
the December 31 coincident with or immediately preceding the date of payment.
(e) There shall be deducted from each payment the amount of any tax
required by any governmental authority to be withheld and paid by the Company or
Subsidiary to such governmental authority for the account of the person entitled
to such payment.
(f) At any time a Participant may request in writing that the Committee
permit the Participant to exercise and receive payment of an amount up to his
then vested interest in his VAP Account if such funds are needed because of an
Unforeseeable Emergency; provided, however, that such payment shall be permitted
only to the extent the amount does not exceed the amount reasonably necessary to
satisfy the emergency need (plus an amount necessary to pay taxes and penalties
reasonably anticipated as a result of the distribution) (or, if less, 40% of the
Participant's vested interest in his VAP Account). Such payments may not be made
to the extent such Unforeseeable Emergency is or may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant's assets (to the extent such liquidation would not itself cause
severe financial hardship).
5.3 Forfeiture of VAP Amounts. Notwithstanding anything to the contrary
contained in this Plan, (a) in the event a Participant shall intentionally
commit an act materially adverse to the interests of the Company or a
Subsidiary, and the Board of Directors of the Company or the Committee shall so
find, his Award shall be deemed to have terminated at the time of such act
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and his interest in his VAP Account shall immediately be terminated and
forfeited and (b) the Committee shall have the sole and absolute discretion to
reduce a Participant's vested interest in his VAP Account, in the event that the
Committee determines that an adjustment is required to be made under Section
8(e) hereof (provided, however, that the Committee shall not have the discretion
to reduce the amount of any amount that was previously paid to a Participant
hereunder).
6. ASSIGNABILITY
No Award to an employee under this Plan shall be transferable by him for
any reason whatsoever; provided, however, that the right to the proceeds of an
Award which are payable upon vesting pursuant to Section 5.2 may be transferred
by will or the laws of descent and distribution.
7. VAP ACCOUNTS
The Company shall maintain an account ("VAP Account") on its books and
records in the name of each Participant to reflect the Participant's interest
under this Plan. The VAP Account of each Participant shall be adjusted in
accordance with the provisions of Sections 5 and 8 hereof. Each Participant's
VAP Account also shall be credited with earnings as determined in accordance
with provisions of this Section 7 and shall be debited for any distributions
made to the Participant from his VAP Account.
As of the end of each calendar year, each Participant's VAP Account shall
be credited with an amount determined by multiplying the Participant's average
VAP Account balance during such year by the average monthly rate during such
year for 10-year U.S. Treasury Bonds. In the event that a Participant terminates
employment prior to the end of a calendar year and becomes entitled to a payment
of his VAP Account hereunder, the Participant's VAP Account
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shall be credited with a pro-rata share of earnings, based on the portion of the
year prior to the payment date.
The Treasurer of the Company (or his delegate) shall keep an accurate
record of the amounts credited or debited to each Participant's VAP Account and,
as of December 31 of each year, shall deliver to each Participant a written
statement showing the credits and debits made during the year to this VAP
Account and the accumulated balance thereof.
8. CALCULATION OF VALUE APPRECIATION; ADJUSTMENTS OF VAP AMOUNTS
Value Appreciation and all VAP Amounts to be credited to a Participant's
VAP Account under this Plan shall be determined based on the actual performance
of Current Projects and on the acquisition and actual performance of New
Projects as hereinafter described. Following the acquisition of New Projects,
the VAP Targets for New Projects shall be included in the VAP Goals for Current
and New Projects.
(a) Annual Value Appreciation of Current and New Projects
As of December 31 of each year, the amount to be credited to a
Participant's VAP Account based on the annual Value Appreciation of all Current
and New Projects shall be determined as follows:
VAP AMOUNT FOR ANNUAL VALUE APPRECIATION OF ALL CURRENT AND NEW PROJECTS
= VAP MULTIPLIER X 30% X VAP TARGET AMOUNT
where
VAP MULTIPLIER = 4 X VAP RATIO -3
where
VAP RATIO = TOTAL ACTUAL ANNUAL VALUE APPRECIATION OF ALL CURRENT
AND NEW PROJECTS
-----------------------------------------------------
TOTAL ANNUAL VAP GOAL OF ALL CURRENT PROJECTS
(INCLUDING VAP TARGETS FOR NEW PROJECTS)
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However, if the VAP Multiplier calculated above is less than 0, it
shall be 0, and if greater than 2.00, it shall be 2.00. See Exhibit I hereto.
(b) Cumulative Value Appreciation of Current and New Projects.
As of December 31 of each year, the amount to be credited to a
Participant's VAP Account based on the cumulative Value Appreciation of all
Current and New Projects from the beginning of the Plan Term (or from the
beginning of a Participant's participation in this Plan, in the case of a
Participant whose initial Award is effective after January 1, 2000) shall be
determined as follows:
VAP AMOUNT FOR CUMULATIVE VALUE APPRECIATION OF ALL CURRENT
AND NEW PROJECTS
= VAP MULTIPLIER X 30% X VAP TARGET AMOUNT
where
VAP MULTIPLIER = 4 X VAP RATIO -3
where
VAP RATIO = ACTUAL CUMULATIVE VALUE APPRECIATION OF ALL CURRENT
AND NEW PROJECTS
---------------------------------------------------
CUMULATIVE VAP GOAL OF ALL CURRENT PROJECTS
(INCLUDING VAP TARGETS FOR NEW PROJECTS)
However, if the VAP Multiplier calculated above is less than 0, it
shall be 0, and if greater than 2.00, it shall be 2.00. See Exhibit I hereto.
(c) VAP Amounts for the Acquisition of New Projects
The acquisition of a New Project for purposes of this Plan shall be
determined by the Committee. The amount to be credited to a Participant's VAP
Account for the Acquisition of a New Project shall be determined as follows:
VAP AMOUNT FOR THE ACQUISITION OF NEW PROJECTS
= VAP MULTIPLIER X 40% X VAP TARGET AMOUNT X 10
where
VAP MULTIPLIER = A
---
B
where
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A = THE PRESENT VALUE OF THE EXPECTED CUMULATIVE VALUE
APPRECIATION OF ALL NEW PROJECTS FOR THE ACTUAL EXPECTED TERM(S) OF
THE NEW PROJECT(S) BASED ON A DISCOUNT FACTOR OF 10%, AND
B = THE TOTAL VAP GOAL FOR NEW PROJECTS OVER THE PLAN TERM AS DETERMINED
BY THE COMMITTEE.
The expected cumulative Value Appreciation for each New Project shall
be reviewed from time to time and the VAP Amount for the Acquisition of the New
Projects shall be adjusted, as appropriate (including, without limitation,
adjustments for amounts previously credited to the VAP Account). Any earnings on
such VAP Amount during the period between reviews shall not be adjusted.
(d) Total VAP Amount for Current and New Projects
The total VAP Amount to be credited to each Participant's VAP Account
shall be determined as of December 31 of each year by adding the VAP amounts for
Current and New Projects (as determined under Section 8(a) and 8(b)) to the VAP
Amounts for the Acquisition of New Projects (as determined under Section 8(c)).
(e) Committee Discretion
Notwithstanding the provisions of this Plan, the Committee, in its
sole discretion, may make equitable adjustments by increasing or decreasing the
VAP Amount to be credited (or that was previously credited) to a Participant's
VAP Account or may approve an Award where one otherwise would not be made.
9. AMENDMENT AND TERMINATION
(a) The Committee or the Board of Directors of the Company, in its sole and
absolute discretion, may alter or amend this Plan from time to time; provided,
however, that no such amendment shall, without the consent of a Participant,
affect the Participant's rights in/the amount of any outstanding Award of such
Participant.
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(b) The Committee or the Board of Directors of the Company, in its sole and
absolute discretion, may terminate this Plan in its entirety at any time;
provided that, except as provided in this Subsection, no such termination shall,
without the consent of a Participant, affect the Participant's rights in/the
amount of any outstanding Award of such Participant. Upon any termination of the
Plan, all outstanding Awards shall be immediately 100% vested. Except as
otherwise provided in an amendment to the Plan, all Awards granted prior to any
termination of this Plan shall continue to be subject to the terms of this Plan.
Notwithstanding the foregoing, upon a complete termination of the Plan, the
Committee or the Board of Directors of the Company, in its sole and absolute
discretion, shall have the right to change the time of distribution of
Participants' Awards under the Plan, including requiring that all such Awards
Units be immediately distributed; provided such action does not otherwise
violate the requirements of Code Section 409A.
(c) Any amendment or termination of the Plan shall be in the form of a
written instrument executed by an officer of the Company on the order of the
Committee or the Board of Directors of the Company. Such amendment or
termination shall become effective as of the date specified in the instrument
or, if no such date is specified, on the date of its execution.
10. GENERAL PROVISIONS
Neither the adoption or operation of this Plan, nor any document describing
or referring to the Plan, or any part thereof, shall confer upon any employee
any right to continue in the employ of the Company or any Subsidiary, or shall
in any way affect the right and power of the Company or any Subsidiary to
terminate the employment of any employee at any time with or without assigning a
reason therefore to the same extent as the Company or a Subsidiary might have
done if this Plan had not been adopted.
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The provisions of the Plan shall be governed by and construed in accordance
with the laws of the State of Texas, except when pre-empted by Federal law.
If an Award is payable to a minor, to a person declared incompetent or to a
person incapable of handling the disposition of his property, the Committee may
direct payment of such Award to the guardian, legal representative or person
having the care and custody of such minor, incompetent or person. The Committee
may require such proof of incompetency, minority, incapacity or guardianship as
it may deem appropriate prior to the distribution of such Award. Such
distribution shall completely discharge the Company and the Subsidiaries from
all liability with respect to such Award.
No trust has been created by the Company or any Subsidiary for the payment
of VAP Amounts granted under this Plan; nor have the Participants been granted
any lien on any assets of the Company or any Subsidiary to secure payment of
such benefits. This Plan represents only an unfunded, unsecured promise to pay
by the Company, and the Participants hereunder are unsecured creditors of the
Company.
Headings are given to the sections of the Plan solely as a convenience to
facilitate reference. Such headings, numbering and paragraphing shall not in any
case be deemed in any way material or relevant to the construction of the Plan
or any provisions thereof. The use of the masculine gender shall also include
within its meaning the feminine. The use of the singular shall also include with
its meaning the plural, and vise versa.
11. EFFECTIVE DATE
The original effective date of this Plan was January 1, 2000.
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EXHIBIT I
TO
THE NORTH AMERICAN COAL CORPORATION
VALUE APPRECIATION PLAN
VAP RATIO VAP MULTIPLIER
- --------- --------------
0.00 0.0
0.75 0.0
0.85 0.4
0.95 0.8
1.00 1.0
1.05 1.2
1.15 1.6
1.25 2.0
1.50 2.0
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