Exhibit 10.3



 






Exhibit 10.3




NACCO MATERIALS HANDLING GROUP, INC.

2005 ANNUAL INCENTIVE COMPENSATION PLAN




Introduction




     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 Employers.



Plan Objective




     The Employers desire to attract and retain talented employees to enable the Employers to meet
their 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 




     The Plan is administered by the Compensation Committee of the Board of Directors of the
Company (the “Committee”). The Committee:




	 	a.  	May amend, modify or discontinue the Plan.

	 
	 	b.  	Will designate Plan Participants.
	 
	 	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 Participants who are
officers and employees classified above salary grade 30.
	 
	 	f.  	May delegate to the Chief Executive Officer of the Company the approval of
incentive compensation Awards to Participants who are classified in salary grade 30 and
below.
	 
	 	g.  	Except as determined by the Committee, a Participant must be employed on
December 31 of the Award Term in order to be entitled to receive an Award hereunder.
Notwithstanding the foregoing, the Committee may approve a pro-rated incentive
compensation Award for Participants in the Plan whose employment is terminated (1) due
to death, Disability, Retirement or facility closure or (2) under other circumstances
at the recommendation of the Chief Executive Officer of the Company.





     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 Employers all present and former Participants and employees 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.



Determination of Corporate Incentive Compensation Pool




     Each Participant in the Plan will have an individual target incentive compensation percentage,
which is determined by the Participant’s salary grade. This percentage is multiplied by the
mid-point of the



 









 





Participant’s salary grade to determine his individual target incentive compensation Award. The
total of the target incentive compensation Awards of all Participants equals the target corporate
incentive compensation pool (“Target Pool”). The Target Pool is approved at the beginning of each
Award Term by the Committee.




     The actual corporate incentive compensation pool (“Actual Pool”) is determined as of the end
of each Award Term based on the Company’s actual performance against specific criteria established
in the beginning of the Award Term by the Committee. The Target Pool is adjusted upwards or
downwards by corporate performance adjustment factors to determine the Actual Pool. In no event
will the Actual Pool exceed 150% of the Target Pool, except to the extent that the Committee elects
to increase the Actual Pool by up to 10%, as described below.



     The Target and Actual Pools may consist of the sum of two or more subpools, provided the
subpools have individual objectives.



     Subject to the Committee’s right to amend or terminate the Plan at any time, 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 Award Term.



     The Actual and Target Pools exclude the Marketing Incentive Plan for regional parts, service,
sales and national account managers. However, total compensation or employees covered by the
Marketing Incentive Plan will be based on competitive levels.



Determination of Individual Incentive Compensation Awards




     Salary grades and the corresponding target incentive percentages for each Participant in the
Plan will be established at the beginning of each Award Term and approved by the Committee.
Individual target incentive compensation will then be adjusted by the appropriate pool or subpool
factor. Such adjusted individual incentive compensation will then be further modified based on the
team performance to which an individual belongs compared to the team goals for the Award Term, and
may be further modified based on a Participant’s performance as compared to their individual goals
for the Award Term.



     The total of all individual incentive compensation Awards must not exceed the Actual Pool for
the Year.



     Below are examples of actual pool and individual Award calculations.


     a. Example calculation for determination actual pool:



Intentionally Omitted




     b. Example calculation for determination of individual incentive compensation Award:



     John Doe:



Intentionally Omitted




Payment Date/Taxes




     Promptly following the Committee’s approval of the final Awards, the Employers shall pay the
amount of such Awards to the Participants in cash, subject to all withholdings and deductions
described in the following sentence; provided, however, that (i) no Award shall be payable to a
Participant except as determined by the Committee and (ii) in no event shall the Awards be paid
later than two and one-half months after the close of the Award Term. Any Award paid to a
Participant under this Plan shall be subject to all applicable federal, state and local income tax,
social security and other standard withholdings and deductions.



 









 





Definitions




     (a) “Award” means cash paid to a Participant under the Plan for the Award Term in an amount
determined in accordance with the Plan.



     (b) “Award Term” means the period from January 1, 2005 through December 31, 2005.



     (c) “Disability” means an approved application for disability benefits under the Company’s
long term disability plan or under any applicable government program.



     (d) “Employers” mean the Company, NMHG Oregon, Inc. and their Subsidiaries.



     (e) “Participant” means any person who is classified by the Employers as a salaried employee
and in salary grade 22 and above, 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 Employers; provided,
however, that the Committee may select any employee who is expected to contribute, or who has
contributed, significantly to the Employers’ 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 Employers who were not
previously designated as Participants. Directors of the Company who are also employees of the
Company are eligible to participate in the Plan. The Committee shall have the power to add
Participants at any later date in the Award Term if individuals subsequently become eligible to
participate in the Plan; provided that they are employed by an Employer for at least 90 calendar
days during the Award Term.



     (f) “Retirement” means (i) the termination of a U.S. Participant’s employment with the
Employers after the Participant has reached age 60 and completed at least 15 years of service with
the Employers or (ii) the termination of a non-U.S. Participant’s employment with the Employers
which qualifies as retirement under local practices and procedures and/or which qualifies the
non-U.S. Participant for foreign retirement benefits.



General Plan 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 Employers, or shall in any way affect the right and
power of an Employer to terminate the employment of any employee at any time with or without
assigning a reason therefor to the same extent as the Employer might have done if this Plan had not
been adopted.



     (b) Governing Law. The provisions of this Plan shall be governed by and construed in
accordance with the laws of the State of North Carolina.



     (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.



     (d) American Jobs Creation Act. It is intended that this Plan be exempt from the
requirements of Section 409A of the Internal Revenue Code, as enacted by the American Jobs Creation
Act.



     (e) Limitation on Rights of Participants; No trust.  No trust has been created by the
Employers for the payment of Awards granted under this Plan; nor have the Participants been granted
any lien on any assets of the Employers to secure payment of such benefits. This Plan represents
only an unfunded, unsecured promise to pay by the Participant’s Employer and a Participant
hereunder is a mere unsecured creditor of his Employer. Notwithstanding the foregoing, in the
event that NMHG Oregon, Inc. is unable



 









 





or refuses to satisfy its obligations hereunder with respect to the payment of Awards to or on
behalf of its employees, the Company shall guarantee and be responsible for the payment thereof.




     (f) Payment to Guardian. If an Award is payable to a minor, to a person declared
incompetent or to a person incapable of handling the disposition of his property, the Committee may
direct payment of such Award to the guardian, legal representative or person having the care and
custody of such minor, incompetent or person. The Committee may require such proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate prior to the
distribution of such Award. Such distribution shall completely discharge the Company from all
liability with respect to such Award.



     (g) Effective Date. This Plan shall become effective as of January 1, 2005.



2005 Performance Targets




The performance targets for the Plan are attached as an Addendum to this document.