1
Exhibit 10(lxxxix)
NACCO INDUSTRIES, INC.
1995 ANNUAL INCENTIVE COMPENSATION PLAN
--------------------------------------------------------------------------------
GENERAL
-------
NACCO Industries, Inc. (the "Company") has established an Annual
Incentive Compensation Plan ("Plan") as part of a competitive compensation
program for officers and key management employees of the Company.
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 eam amual 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. Participants will
include all executive officers and certain key employees.
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
annual incentive compensation pool.
e. Will approve individual incentive compensation awards to officers
and key employees.
f. May delegate to the Chief Executive Officer of the Company the
approval of incentive compensation awards to employees below the
officer level.
2
g. May consider at the end of each year the award of a discretionary
bonus amount to non-participants as an addition to the regular
incentive compensation pool on a special one-time basis to
motivate individuals not eligible to participate in the Plan.
h. May approve a pro rata incentive compensation award for
participants in the Plan whose employment is terminated (1) due
to death, disability, retirement or facility closure, such award
to be determined pursuant to the provisions of subparagraphs e.
and f. above or (2) under other circumstances at the
recommendation of the Chief Executive Officer of the Company.
DETERMINATION OF CORPORATE INCENTIVE COMPENSATION POOL
------------------------------------------------------
Each participant in the Plan will have an individual target incentive
compensation percentage which is determined by the participant's salary level.
This percentage is multiplied by the mid-point of the participant's salary
range to determine his individual target incentive compensation award. The
total of the target incentive compensation awards of all participants equals
the target corporate incentive compensation pool ("Target Pool"). The Target
Pool is approved each year by the Committee.
The actual corporate incentive compensation pool ("Actual Pool") is
determined at the end of each year based on the Company's actual performance
against specific criteria established in the beginning of the year by the
Committee. The Target Pool is adjusted upwards or downwards by corporate
performance adjustment factors to determine the Actual Pool. In no event will
the Actual Pool exceed 150% of the Target Pool, except to the extent that the
Committee elects to increase the total of all individual incentive compensation
awards to not more than 110% of the Actual Pool, as described below.
It is the intent of the Plan that the Actual Pool, as determined above,
will be the final total corporate incentive compensation pool. However, the
Committee, in its sole discretion, may increase or decrease by up to 10% the
Actual Pool or may approve an incentive compensation pool where there would
normally be no pool due to Company performance which is below the criteria
established for the year.
DETERMINATION OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS
---------------------------------------------------------
Salary grades and the corresponding target incentive percentages for
each participant in the plan will be established at the beginning of each year
and approved by the Committee. Individual target incentive compensation will
then be adjusted by the appropriate pool 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.
-2-
3
The total of all individual incentive compensation awards must not
exceed 110% of the Actual Pool for the year.
a. Example of Calculation for Determination of Actual Pool
Target Actual Achievement Payout
Sub Pool Criteria Weighting Performance Performance Percentage* Percentage
----------------- --------- ----------- ----------- ----------- ----------
Intentionally Omitted
<FN>
-------------
* Achievement % is determined by applying a different formula to the Actual
Performance for each Sub Pool Criteria
b. Example of Calculation for Determination of lndividual lncentive
Compensation Awards
John Doe Base Pay $100,000
Annual Incentive Compensation Percentage 20%
1. Total Payout Percentage: 107.16% of Target
2. Individual Performance factor: 95.0%
3. 107.16% x 95.0% = 101.80%
4. 101.80% x 20% = 20.36% Adjusted Percentage
5. 20.36% x $100,000 = $20,360 Individual Incentive Compensation Award
1995 PERFORMANCE TARGETS
------------------------
See Plan Sumary.
-3-