Document:

Ex-10.4

 

Exhibit
10.4

THE NORTH AMERICAN COAL CORPORATION

2008 ANNUAL INCENTIVE COMPENSATION PLAN

SUMMARY

This Incentive Compensation Plan (the “Plan”) offers a highly attractive incentive compensation
opportunity to senior managers of The North American Coal Corporation (the “Company” or “NAC”) and
its subsidiaries (the “Subsidiaries”) when specified 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 base salary midpoint, that
establishes the target incentive compensation Award they may receive under the Plan when performance objectives are
met.
	 
	 	n	 	 The individual target Award 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 Award 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 actual incentive Award payments of up to 150 percent of the incentive
target Award, except to the extent the Committee elects to increase or decrease the actual pool by up to 10 percent, as
described below.
	 
	 	n	 	 A performance/payout formula 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, actual 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.
	 
	 	n	 	All Awards will be paid in cash, during the period from January 1st through March 15th after the
end of the Award Term.

This Incentive Compensation Plan allows management and the Committee to establish, in advance, the
performance expectations and related incentive compensation potential that Plan Participants can
expect for the Award Year. At the end of the Award Year, the Plan focuses judgment of the
management team’s performance on predetermined objectives that should produce fairness in the
determination of Awards.

 

 

PLAN STRUCTURE

Individual Incentive Targets

The primary focus of the Plan is the individual incentive compensation target Award. At the
beginning of each Award Term, each Participant is assigned a target Award, stated as a
percentage of the mid-point of base salary, which is payable under the Plan when all
relevant performance objectives are achieved. The Plan provides for payments above or below
the target Award to reflect acceptable variances from performance objectives.

Performance Goals

The following four sets of performance goals apply for the 2008 Award Term:

                    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 Participant has the
most control. Weightings will be stated as a percentage and total 100 percent for each
Participant. The weightings will be established at the beginning of each Award Year to
reflect current organizational accountabilities and the relative importance of the various
performance components. The applicable weightings for the 2008 Award Year 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 will 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 Formula

Combining the performance and payout ranges yields a performance/payout formula 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 formula 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

Notwithstanding any provision of the Plan to the contrary, no incentive compensation Awards
will be earned under the Plan in any Award 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 an Award Year to positions eligible for
participation in the Plan may be included in the Plan on a prorata basis (as determined by
the Committee, in its sole discretion). Unless otherwise determined by the Committee, a
Participant must be employed by an Employer on December 31 of the Award Term in order to be
entitled to receive an Award hereunder.

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 under the Plan.
However, the Committee, in its sole discretion, may increase or decrease, by up to 10
percent, the total incentive compensation Award pool or may approve incentive compensation
Award payments where normally there would be no payment, due to corporate performance which
is below the criteria established for the Award Year.

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 Employers and 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.

PAYMENT DATE/TAXES

     Promptly following the Committee’s 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
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) all Awards shall be paid during the
period from January 1st through March 15th 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, 2008 through December 31, 2008.

     (c) “Employer” means the Company and the Subsidiaries.

     (d) “Participant” means any person who is classified by an Employer as a salaried employee,
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 Employers 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. Each
Participant shall be notified that he is eligible to receive an Award and the amount of his target
Award. If a Participant receives a change in salary midpoint, such Participant shall be notified
of any resulting change in his target Award.

 

 

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 an Employer, or shall in any way affect the right and power
of the 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 Texas.

     (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, and the Plan shall be interpreted and administered in a manner to give effect to such intent.

     (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.

     (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 and the
Subsidiaries from all liability with respect to such Award.

     (g) Effective Date. This Plan shall become effective as of January 1, 2008.

2008 PERFORMANCE TARGETS

     The performance targets for the Plan are attached as an Addendum to this document.EX-10.5

 

Exhibit 10.5

July 30, 2007

Mr. Philip Kinley

2176 Heron Lane

Marion, OH 43302

Re: Confidential Separation Agreement And General Release

Dear Phil,

This letter constitutes a Confidential Separation Agreement and General Release (“Agreement”)
between you on one side and Commercial Savings Bank, its corporate holding Company, Commercial
Bancshares, Inc., and their respective affiliates, officers, directors, and shareholders
(collectively, “we”, “us”, “our” or “ours”).

By way of background, you have resigned from your employment by us effective as of June 30, 2007
(“Resignation Date”). You desire to secure the severance benefits provided in this Agreement, and
recognize that the severance benefits provide value to which you would not otherwise be entitled.
Finally, you and we desire to effect a final settlement of all matters relating to your employment
by us.

Based upon the foregoing and in consideration of the mutual covenants and promises in this
Agreement and other good and valuable consideration, you and we agree to the following:

	1.	 	Neither this Agreement nor any action under this Agreement shall in any way be construed as
an admission by either you or us of any liability, wrongdoing or violation of law, regulation,
contract or policy.

	2.	 	We will pay or provide you the following in final settlement of all claims that you may have
against us (collectively “severance payments”):

	 	(a)	 	We will pay to you a salary of $12,166.67 per month for a period of twelve
(12) months from the Resignation Date (“Severance Period”). You and we agree that the
payments are allocated 25% to salary continuation and 75% to your covenant not to
compete with us. Federal, state, and local taxes, and social security contributions
will be withheld from the payments allocated to salary. Payments allocated to the
covenant not to compete will be reported on IRS Form 1099.
	 
	 	(b)	 	You may participate in the family group health, disability, and other health
and welfare insurance plans made available to our employees until the earliest to
occur of [1] the expiration of one year following the Resignation Date or [2] the date
on which you agree to new employment.

 

 

Mr. Philip Kinley

July 30, 2007

Page 2

	 	(c)	 	We will continue to pay your Marion Country Club membership as a part of
CSB’s corporate membership until December 31, 2008.
	 
	 	(d)	 	You will be paid no wages, bonuses, benefits, compensation or remuneration,
other value of any kind subsequent to the Resignation Date other than the items
expressly listed in items (a) and (b) above.

	3.	 	You hereby resign as an employee of ours. You hereby decline reelection, reinstatement,
employment and rehire by us and waive all rights to claim such relief. You agree never to
seek or apply for the position of director or employee of any of us. If we merge with,
purchase, or enter into any other business combination with your then-current employer, this
paragraph shall not apply.

	4.	 	This Agreement is confidential. You shall not disclose this Agreement in any way to any
person other than your spouse, legal counsel and tax advisor. If you disclose this Agreement
to your spouse, legal counsel or tax advisor, you shall ensure that they will be similarly
bound to protect its confidentiality and that a breach of this paragraph by your spouse,
legal counsel or tax advisor shall be considered a breach of this paragraph by you.
Notwithstanding this paragraph, you may disclose paragraph 6 of this Agreement to a potential
employer. You and we agree to direct all external communications regarding you and your
employment with us (other than the initial press release) to Stanley Kinnett, Vice Chairman
of the Board of Directors, or others for which we have given you written notice.

	5.	 	You represent that you have not filed any pending complaint, charge, claim or grievance
against us with any local, state or federal agency, court or commission.

	6.	 	(a) You acknowledge the following:

	 	(i)	 	As a result of your employment with us, you have obtained
secret and confidential information concerning our businesses (“Confidential
Information”), including, without limitation, the operations, finances,
business plans, product and process specifications, costs, price,
profitability, sales information, the identity of potential acquisitions, and
the identity of customers and sources of supply including their needs,
requirements, and the nature and extent of contracts with them;
	 
	 	(ii)	 	You acknowledge that we will suffer substantial damage that
will be difficult to compute if you enter into a Competing Business (as
defined in paragraph 6(d)(i)), or if you disclose Confidential Information;
and
	 
	 	(iii)	 	This Agreement is reasonable and necessary for the protection of our businesses and the businesses
of our subsidiaries and divisions.

 

 

Mr. Philip Kinley

July 30, 2007

Page 3

	 	(b)	 	You will not use for your own benefit or disclose any Confidential Information
without our express written consent.
	 
	 	(c)	 	You warrant that you have delivered to us all of our property, including
without limitation all memoranda, notes, files, computers, cell phones or other
wireless devices, software, discs, memory storage records, reports, manuals, drawings,
blueprints, credit cards and other documents as well as all copies thereof. You also
warrant that you have not kept, created, or downloaded any copy of our computer
records.
	 
	 	(d)	 	For a period of two years following the Resignation Date, you, without our
prior express written permission, shall not (i) enter into the employ of or render any
services, in an executive, managerial, marketing or sales capacity for, any bank,
similar financial institution or bank holding company that maintains its principal
corporate office within thirty (30) miles of our corporate office in Upper Sandusky,
Ohio or for a branch office of any bank, similar financial institution or bank holding
company, located within thirty (30) miles of our corporate office in Upper Sandusky,
Ohio; (ii) engage in any Competing Business; (iii) solicit, induce or entice anyone,
or cause any other person or entity to solicit, recruit, induce or entice anyone, to
leave our employ; or (iv) interfere with, or endeavor to entice away from us, any of
our customers or contractors.
	 
	 	(e)	 	For breaches of paragraph 6(a) through 6(d),

	 	(i)	 	we shall have the right to have those provisions specifically
enforced by a court order and to obtain any other relief to which we may be
entitled by law or equity from any court having jurisdiction; and
	 
	 	(ii)	 	We shall have the right to require you to pay over to us all
severance payments already paid by us and to terminate our obligation to
provide any further severance payments.

	 	(f)	 	Each of the rights and remedies enumerated in this paragraph 6 shall be
independent of the other, shall be severally enforceable, and shall be in addition
to, and not in lieu of, any other rights and remedies available to us in law or
equity.

	7.	 	You shall not make any disparaging or negative statements regarding us or our officers,
directors or employees. We, in turn, shall not to make any disparaging or negative
statements regarding you.

 

 

Mr. Philip Kinley

July 30, 2007

Page 4

	8.	 	Throughout the Severance Period, you shall, upon reasonable notice, advise and assist us in
preparing such operational, financial or other reports or other filings as we may reasonably
request, and to respond to inquiries concerning our operations, finances and business and
otherwise cooperate with us as we shall reasonably request. You shall assist and cooperate
with us at our request in prosecuting or defending against any litigation, complaints or
claims against or involving us. We shall pay your necessary travel costs and expenses if you
assist us under this paragraph.

	9.	 	As a material inducement to us to enter this Agreement, you hereby irrevocably and
unconditionally release, acquit and forever discharge each of us, and our respective
successors, assigns, agents, directors, officers, employees, representatives, subsidiaries,
divisions, parent corporations and affiliates, and all other persons acting by, through or in
concert with any of us or any of the foregoing (collectively “Releasees”) from any and all
charges, complaints, claims, liabilities, obligations, promises, agreements, actions, damages,
expenses (including attorneys’ fees and costs actually incurred), or any rights of any and
every kind or nature, accrued or unaccrued, which you have or claim to have against each or
any of the Releasees, whether known to you or not.
	 
	 	 	This release includes, but is in no way limited to, all matters relating to or arising out
of your employment and termination of employment by us and all claims for severance
benefits. The release includes, but is in no way limited to, rights and claims under the Age
Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act, as amended, the
Americans With Disabilities Act, the Family Medical Leave Act, and all other state, local or
municipal fair employment and discrimination laws.
	 
	 	 	Notwithstanding the foregoing, this release and waiver is not intended to affect, nor shall
it be construed to affect, your vested or accrued rights and benefits in the following
plans:

	 	a)	 	Commercial Savings Bank 401 (k) Retirement Plan;
	 
	 	b)	 	1997 Commercial Bancshares, Inc. Stock Option Plan;
	 
	 	c)	 	Commercial Savings Bank Director’s
Deferred Compensation Program;
	 
	 	d)	 	Executive Supplemental Retirement Plan as
administered by Benmark.

	 	 	Notwithstanding the foregoing release and waiver of rights and claims, we shall continue to
indemnify you for all your acts and omissions during the course of, and within the scope of
your active employment with us, pursuant to our policies, by-laws, and contracts of
insurance, as long as your acts and omissions were in good faith.
	 
	10.	 	This Agreement shall be binding upon, and inure to the benefit of, your and our
respective heirs, executors, administrators, representatives, successors and assigns and

 

 

Mr. Philip Kinley

July 30, 2007

Page 5

shall inure to the benefit of the Releasees and to their respective heirs, administrators,
representatives, executors, successors, and assigns.

	11.	 	You shall indemnify and hold each and all of the Releasees harmless from and against any and
all loss, cost, damage or expense, including, without limitation, attorneys’ fees incurred by
the Releasees, arising out of the breach of the Agreement by you.

	12.	 	This Agreement is final and binding and constitutes the complete and exclusive statement of
the terms and conditions of settlement, and no representations or commitments were made by
the parties to induce the Agreement other than as expressly set forth in this Agreement.

	13.	 	You have a right to consult an attorney before signing this Agreement. You have 21 days from
the receipt of this letter to consider this Agreement, and you may revoke this Agreement
within seven (7) days of signing it.
	 
	 	 	You may waive any portion of the 21-day period to consider this Agreement by voluntarily
signing and delivering this Agreement before the expiration of 21 days.
	 
	 	 	To revoke this Agreement, you must deliver a written notice of revocation addressed
to the Vice Chairman of the Board and Chairman of the Compensation Committee
of the Board of Directors of Commercial Bancshares, Inc., Mr. Stanley Kinnett, at
our corporate headquarters, 118 South Sandusky Avenue, Upper Sandusky, Ohio
43351 no later than the seventh (7th) day after you sign this Agreement.

	14.	 	This Agreement may not be modified or supplemented except by a subsequent written Agreement
signed by the party against whom enforcement of the modification is sought.

	15.	 	The validity, construction and enforceability of this Agreement shall be governed in all
respects by the laws of the State of Ohio with venue being in Wyandot County, without regard
to its conflicts of laws rules.

	16.	 	You warrant to us that you have carefully read the entire document, that a copy of the
document was available to you prior to execution, that you know and understand the provisions
of this document, and that you have signed the document as your own free act and deed.

	17.	 	If it is subsequently determined by the Internal Revenue Service, or by a state or local
taxing authority, that any portion of the payment to you for your covenant not to compete
constitutes taxable wage income to you, you shall indemnify us from any and all assessments,
fines or penalties that may be issued against any of us or any of our employees, officers,
directors or agents as a result of any failure to make any withholdings from the payment.

 

 

Mr. Philip Kinley

Jyly 30, 2007

Page 6

By signing the Acceptance below my signature, you become bound by this Agreement.

	 	 	 	 	 
	 	Sincerely yours,

Commercial Savings Bank and Commercial Bancshares,
Inc.

 	 
	Date: 8-13-07 	By:  	/s/ Michael Shope
 	 
	 	 	Michael Shope, Chairman 	 
	 	 	 	 
	 

Acceptance

     I hereby accept the foregoing Agreement.

	 	 	 	 	 
	 	 	 
	Date: 7-30-07 	/s/ Philip Kinley
 	 
	 	Philip Kinley

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