EX-10(XLV) N. American Coal Comp Plan



 



Exhibit 10(xlv)


THE NORTH AMERICAN COAL CORPORATION

2004 INCENTIVE COMPENSATION PLAN



SUMMARY



The Incentive Compensation Plan (Plan) offers a highly attractive incentive
compensation opportunity to senior managers when all performance objectives
under their control or influence are achieved. This is accomplished through a
structure containing the following elements:



	 	n	 	Each participant is assigned an individual incentive target,
stated as a percentage of their salary midpoint, that establishes
the incentive compensation amount they will receive when performance
objectives are met.
	 
	 	n	 	The individual target amount is allocated among the following
performance components:




	 	-	 	North American Coal (NAC) corporate performance.
	 
	 	-	 	Bellaire Corporation cash flow.
	 
	 	-	 	Business unit results.
	 
	 	-	 	Individual achievement.





	 	n	 	Percentage weightings are assigned to each component, based on the
participant’s accountabilities and their impact on each component.
	 
	 	n	 	One or more performance objectives will be established at the
beginning of the year for each performance component.
	 
	 	n	 	A performance range, which defines the acceptable level of results,
from threshold to maximum, is created for each performance objective.
	 
	 	n	 	A payout range is defined, which provides for incentive payments of up
to 150 percent of the incentive target, except to the extent the
Committee elects to increase the actual pool by up to 10 percent, as
described below.
	 
	 	n	 	A performance/payout schedule combines the two ranges into a matrix
that defines the level of incentive compensation payment that will
result from each level of performance.
	 
	 	n	 	After audited financials are available, awards will be calculated
based on actual results against the established objectives.
	 
	 	n	 	A final individual performance adjustment may be made, within a range
of ± 10 percent of the calculated award, based on a judgment of the
participant’s overall performance.



This Incentive Compensation Plan will allow management and the Board to
establish, in advance, the performance expectations and related incentive
compensation potential that NAC’s executives can expect for the year. At
year-end, the Plan focuses judgment of the management team’s performance on
predetermined objectives that should produce fairness in the determination of
rewards.


 






 


PLAN STRUCTURE




	 	 	Individual Incentive Targets
	 
	 	 	The primary focus of the proposed Plan is the individual incentive
compensation target. Each participant is assigned a target, stated as a
percentage of the mid-point of base salary, which will be paid when all
relevant performance objectives are achieved. The Plan provides for
payments above or below the target to reflect acceptable variances from
performance objectives.
	 
	 	 	Performance Goals
	 
	 	 	Four sets of goals are proposed:



Intentionally Omitted




	 	 	Incentive Award Range
	 
	 	 	Actual performance results attained probably will not match the
established performance goals exactly. Therefore, the Plan is designed
to provide incentive compensation payouts of up to 150 percent of the
target award if actual results fall within a predetermined range of
acceptable performance.
	 
	 	 	The award range is defined as follows:




	 	 	 	 	 	 	 
	 	 	% of	 	 
	Award Level	 	Target	 	Description
	
	 	
	 	

	Maximum	 	 	
150	%	 	Highest level of incentive paid.
	 
	Target	 	 	
100	%	 	Competitive incentive opportunity for
achieving all-important goals.
	 
	Threshold	 	 	
25% to 50	%	 	Incentive paid when results meet minimum
acceptable standards.
	 
	Below threshold	 	 	
0	%	 	Performance does not merit incentive
payment.



 






 




	 	 	Component Weightings
	 
	 	 	Participants’ potential incentive awards will be allocated between
performance components based on their individual impact on results. The
allocations allow for awards to be earned based on the achievement of the
performance objectives over which each executive has the most control.
Weightings will be stated as a percentage and total 100 percent for each
participant. The weightings will be established each year to reflect
current organizational accountabilities and the relative importance of
the various performance components. Our recommended weightings are as
follows:



Intentionally Omitted




	 	 	When there is more than one goal for a performance component, further
percentage weightings may be assigned, within the overall weightings, to
reflect the relative priority of each goal. For example, if the
individual component has a 40 percent weighting and there are five
individual goals, each individual goal might be assigned a priority
weighting of 20 percent.
	 
	 	 	Performance Range
	 
	 	 	A range of performance acceptable for incentive compensation payment will
be established for each performance objective. For quantitative goals,
the range may be set as a percentage of the objective. For goals that
cannot be quantified, the range will be defined in narrative form.
	 
	 	 	The following general definitions will apply. The percentage ranges
indicated are only guidelines; specific percentage ranges or narrative
descriptions should be determined for each goal based on the definitions.




	 	 	 	 	 	 	 
	Performance	 	Performance Percentage	 	 
	Level	 	Guideline	 	Definition
	
	 	
	 	

	Threshold	 	 	
75	%	 	Minimum acceptable results
justifying payment of
incentives.
	 
	Objective	 	 	
100	%	 	Results meet high
performance demands
justifying fully
competitive rewards.
	 
	Maximum	 	 	
125	%	 	Highest foreseeable level
of performance.



 






 




	 	 	Performance/Payout Schedule
	 
	 	 	Combining the performance and payout ranges yields a performance/ payout
schedule as in the following example:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	Definition	 	Results	 	Award Levels	 	Payout
	
	 	
	 	
	 	
	 	

	Threshold	 	
Minimum
	 	 	75	%	 	Threshold
	 	 	50	%
	 
	Objective	 	
On plan
	 	 	100	%	 	Target
	 	 	100	%
	 
	Maximum	 	
Exceeding expectations
	 	 	125	%	 	Maximum
	 	 	150	%




	 	 	This schedule is applied separately to the results of each established
performance element to determine the incentive amount earned in
accordance with assigned weightings. Performance that falls between the
defined levels would result in proportionally adjusted payouts, which may
be calculated mathematically or determined judgmentally.
	 
	 	 	Corporate Performance Threshold
	 
	 	 	No incentive compensation awards will be earned under the Plan in any
year unless the threshold level of the corporate performance component is
achieved. Once the corporate performance threshold is attained, each
performance objective is separate and distinct. This means that partial
awards can be earned for the attainment of one performance objective even
if another is not sufficient to generate a payout.
	 
	 	 	Individual Adjustment Factor
	 
	 	 	Each individual award, as calculated above, may be adjusted upward or
downward by as much as 10 percent of the total award, based on
management’s’ perceptions of each individual’s overall performance.
	 
	 	 	Partial Awards
	 
	 	 	Executives who are hired or promoted during the year to positions
eligible for participation in the Plan may be included in the Plan on a
prorata basis.
	 
	 	 	Committee Discretion
	 
	 	 	It is the intent of the Plan that the total incentive compensation, as
determined above, will be the final total corporate incentive
compensation to be paid. However, the Committee, in its sole discretion,
may increase or decrease, by up to 10 percent, the total incentive
compensation or may approve an incentive compensation payment where
normally there would be no payment, due to corporate performance which is
below the criteria established for the year.



2004 PERFORMANCE TARGETS




	 	 	See Schedule – Intentionally Omitted.