Document:

Ex-10.1

 

EXHIBIT 10.1

COMPREHENSIVE EQUITY COMPENSATION PLAN

FOR DIRECTORS AND EMPLOYEES

DIRECTOR FEE DEFERRAL AGREEMENT

LSB BANCSHARES, INC.

Participant’s Name: _________________________

Year: 200___

     THIS DIRECTOR FEE DEFERRAL AGREEMENT (“Deferral Agreement”) is between LSB Bancshares, Inc., a
North Carolina corporation (the “Company”), and the Participant named above (“Participant”). This
Deferral Agreement together with any attachments is an “Award Agreement” within the meaning of and
made pursuant and subject to the provisions of the LSB Bancshares, Inc. Comprehensive Equity
Compensation Plan for Directors and Employees (the “Equity Plan”), a copy of which has been
furnished to Participant. All capitalized terms used but not defined herein have the same meaning
given them in the Equity Plan.

Deferral Election

Instructions to Participant: To defer Board retainers, select A; to defer Board meeting
fees, select B (you may select both A and B if you wish). Choose C if you do not wish to defer
Board meeting fees or quarterly retainers. (To make your selection(s), put an “X” in the brackets
of your choice or choices below.)

	 	 	 	 	 
	A.

	 	Deferral of Quarterly Retainers
	 
	 	 	 	 
	

	 	o
	 	For the year specified above, I hereby elect to defer all of the Quarterly
Retainers not yet earned to which I will become entitled for such year.
	 
	 	 	 	 
	B.

	 	Deferral of Meeting Fees
	 
	 	 	 	 
	

	 	o
	 	For the year specified above, I hereby elect to defer all of the Board of
Directors Meeting Fees not yet earned to which I will become entitled for such year.
	 
	 	 	 	 
	C.

	 	No Deferral of Quarterly Retainers or Meeting Fees
	 
	 	 	 	 
	

	 	o
	 	For the year specified above, I hereby elect not to defer any
Quarterly Retainers or Meeting Fees for such year, but rather to be paid all Quarterly
Retainers and Meeting Fees to which I will become entitled for such year as and when
such amounts are otherwise payable to me by the Company.

 

 

Deferred Stock Units

     The Quarterly Retainers and Board Meeting Fees deferred pursuant to this Deferral Agreement
will be converted into Deferred Stock Units in accordance with the additional provisions
established by the Committee and described in Exhibit A attached hereto and incorporated
herein by reference (the “Deferral Provisions”). Deferred Stock Units may be redeemed and paid
only as provided in the Deferral Provisions and the Equity Plan.

Effective Date

     This Deferral Agreement shall be effective as of the later of (a) the date of execution below,
or (b) the date on which the Committee approves this Deferral Agreement and the final form of the
Deferral Provisions. The undersigned Participant may revoke this Deferral Agreement by delivering
written notice of revocation to the Company’s Chief Financial Officer or Secretary no later than
5:00 p.m. Eastern Standard Time on December 31, 2004.

Acknowledgment and Agreement

     By signing this Deferral Agreement, I agree to be bound by all the terms and provisions of
this Deferral Agreement, the Deferral Provisions and the Equity Plan. I hereby acknowledge receipt
of the Equity Plan and a draft of the Deferral Provisions and I understand and acknowledge that the
final Deferral Provisions attached hereto as Exhibit A will reflect such changes as the Committee
or its designee may approve. I understand that no monies or Shares will be set aside in trust in
my name with respect to any of my deferrals or any Deferred Stock Units credited to my account
under the Deferral Provisions, and that I will at all times be an unsecured creditor of the Company
with respect to benefits that may become payable hereunder.

	 	 	 	 	 
	
 

	 	
 
	Date

	 	Director
	 
	 	 	 	 
	

	 	Address:	 	 
	

	 	 	 	
 
	

	 	 	 	
 

Return your completed Fee Deferral Agreement to the Committee, care of:

Mr. Monty Oliver

LSB Bancshares, Inc.

One LSB Plaza

Lexington, North Carolina 27292

Approval/Rejection of Election

     The Committee hereby (please check one box): o accepts o rejects the deferral elections
contained herein.

	 	 	 
	
 

	 	
 
	Date

	 	Authorized Signer on Behalf of Committee

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EXHIBIT A

DEFERRAL PROVISIONS ASSOCIATED WITH

DIRECTOR FEE DEFERRAL AGREEMENT

ARTICLE 1

PARTICIPATION

     Section 1.1 Applicability. The Committee has established a form of Director Fee Deferral
Agreement (“Deferral Agreement”) to provide a vehicle for members of the Board (each, a
“Participant”) to defer receipt of quarterly retainers (“Quarterly Retainers”) and/or regular
monthly meeting fees (“Meeting Fees”) for serving on the Board. Absent a deferral election, the
aggregate amount of the Participant’s Quarterly Retainers and Meeting Fees for a calendar year are
generally paid in full in a single payment during the first calendar quarter of such year.

     Section 1.2 Deferral Elections. The Participant may elect to defer receipt of Quarterly
Retainers and/or Meeting Fees by filing a completed Deferral Agreement with the Committee in
accordance with the provisions of this Section. The Participant must file the Deferral Agreement
with the Committee prior to the first day of the calendar year for which it is to be effective (the
“Deferral Year”). The Deferral Agreement shall, to the extent set forth therein, apply only to
Quarterly Retainers and/or Meeting Fees payable in the Deferral Year but not yet earned by the
Participant and to which he has not yet become entitled at the time he files his Deferral Agreement
with the Committee. Once filed in accordance with this paragraph, the Participant’s Deferral
Agreement shall remain in effect for the entire Deferral Year and shall expire on December 31 of
the Deferral Year or, if earlier, on the effective date of the Participant’s termination of Service
as a member of the Board.

     Section 1.3 Crediting Deferred Stock Units to the Participant’s Account. The Committee shall
establish and maintain a separate bookkeeping account for each Participant who defers Quarterly
Retainers or Meeting Fees under the Deferral Agreement. Whenever payment of a Quarterly Retainer
or Meeting Fee is deferred pursuant to a Participant’s Deferral Agreement (a “Deferral Date”), the
Committee shall credit to the Participant’s account the number of Deferred Stock Units equal to:

	 	 	     (a) the dollar amount deferred on the Deferral Date, divided by
	 
	 	 	     (b) the Fair Market Value of a Share on the Deferral Date as determined by the
Committee in its sole and absolute discretion.

For purposes hereof, each “Deferred Stock Unit” is a bookkeeping entry representing a single or
fractional Share, as applicable.

     Section 1.4 Crediting Dividend Equivalents. Whenever the Company pays a dividend on its
Shares, the Committee shall credit to the Participant’s account the number of Deferred Stock Units
equal to:

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	 	 	     (a) in the case of a dividend paid in Shares,

	 	 	     (i) the number of Shares the Participant would have received had he been the
record owner on the dividend record date of actual Shares represented by the
Deferred Stock Units credited to his account on such record date, as determined by
the Committee, divided by
	 
	 	 	     (ii) the Fair Market Value of a Share on the record date as determined by the
Committee in its sole and absolute discretion.

	 	 	     (b) in the case of a dividend paid in cash,

	 	 	     (i) the amount of cash dividends that the Participant would have received had
he been the record owner on the dividend record date of actual Shares represented by
the Deferred Stock Units credited to his account on such record date, as determined
by the Committee, divided by
	 
	 	 	     (ii) the Fair Market Value of a Share on the record date as determined by the
Committee in its sole and absolute discretion.

     Section 1.5 Statement of Account. As soon as administratively practicable following the
Participant’s written request, the Committee shall provide to him a statement showing the number of
Deferred Stock Units credited to his account. Notwithstanding the foregoing, the Committee is not
required to provide a written statement more than once per year.

ARTICLE 2

BENEFIT PAYMENTS

     Section 2.1 Termination of Service. Upon a Participant’s termination of Service on the Board
for any reason other than death, the Participant shall be entitled to receive payment with respect
to the Deferred Stock Units credited to his account as provided in this Section. At the time of
payment, the Company shall redeem the Participant’s Deferred Stock Units by delivering to the
Participant one Share for each one Deferred Stock Unit. Except as provided in Section 2.3, the
Company shall deliver the Shares payable under this Section in a single transaction as soon as
administratively practicable in the calendar year immediately following the year in which the
Participant terminates Service. Notwithstanding the foregoing:

	 	 	     (a) if the Participant is a “specified employee” within the meaning of Code Section
409A(a)(2)(B)(i), delivery of such Shares shall not occur before the date which is six
months after the date of such termination of Service; and
	 
	 	 	     (b) delivery of such Shares shall not occur in any event prior to the Participant’s
“separation from service” within the meaning of Code Section 409A(a)(2)(A)(i).

     Section 2.2 Survivor Benefits. If a Participant dies while in Service on the Board, the
Participant’s Beneficiary shall be entitled to receive payment with respect to the Deferred Stock
Units credited to the Participant’s account as provided in this Section. At the time of payment,

4

 

the Company shall redeem the Deferred Stock Units credited to the Participant’s account by
delivering to the Beneficiary one Share for each one Deferred Stock Unit. Except as provided in
Section 2.3, the Company shall deliver the Shares payable under this Section in a single
transaction as soon as administratively practicable in the calendar year immediately following the
year in which the Participant dies.

     Section 2.3 Installment Payout Election. Notwithstanding the provisions of Sections 2.1 and
2.2, a Participant who makes an installment payout election in accordance with this Section 2.3
shall have his Deferred Stock Units redeemed into Shares and delivered in five substantially equal
annual installments (subject to adjustments on account of the continuing crediting of dividend
equivalents pursuant to Section 1.3) beginning at the time specified in Section 2.3(b)(i) or
2.3(b)(ii), as applicable. The following rules shall apply to installment payout elections:

	 	 	     (a) A Participant who desires to have his benefits paid in installments must complete
and file with the Committee, at least 12 months prior to the date benefits would have
otherwise been payable under Section 2.1 or 2.2, an installment payout election in such form
as the Committee may require.
	 
	 	 	     (b) If the Participant makes a timely election pursuant to Section 2.3(a), installment
payments shall commence:

	 	 	     (i) in the case of benefits payable pursuant to an event described in Section
2.1, five years after the date the benefits would have otherwise been payable under
Section 2.1; or
	 
	 	 	     (ii) in the case of benefits payable pursuant to an event described in Section
2.2, on the date the benefits would have otherwise been payable under Section 2.2
or, if later, 12 months after filing of the installment payout election.

	 	 	     (c) A Participant’s installment payout election will not apply if the Participant has
fewer than 1,000 Deferred Stock Units credited to his account at the time of his termination
of Service.
	 
	 	 	     (d) If the Participant dies while receiving installments but before receiving the last
payment due, the remaining benefit payments shall be paid to the Participant’s Beneficiary
in the same manner as they would have been paid to the Participant. If the Participant’s
Beneficiary dies while receiving installments but before receiving the last payment due, the
remaining benefit payments shall be paid in a lump sum to the Beneficiary’s estate.

     Section 2.4 Payment Before Service as Director Terminates. Except as permitted in Section
2.5, benefits are not payable prior to the Participant’s termination of Service.

     Section 2.5 Hardship Withdrawals. Notwithstanding any other provision hereof, a Participant
may apply for early payment with respect to some or all of his Deferred Stock Units in the event of
an unforeseeable emergency. An “unforeseeable emergency” is a severe financial hardship to the
Participant resulting from an illness or accident of the Participant, his spouse, or a

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dependent of the Participant (as defined in Code Section 152(a); loss of the Participant’s
property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant. If the Committee determines in its
discretion that the Participant has experienced an unforeseeable emergency, the Committee may
direct the Company to redeem some or all of his Deferred Stock Units by issuing or delivering to
the Participant Shares having a Fair Market Value not exceeding the amount necessary to satisfy the
emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the early
payment, and to deliver such Shares to the Participant. In determining the amount necessary to
satisfy the emergency, the Committee shall take into account the extent to which the Participant’s
hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or
by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not
itself cause severe financial hardship). The Participant must apply to the Committee for an early
payment pursuant to this Section 2.5 in such form and in accordance with such procedures as the
Committee shall prescribe.

     Section 2.6 Payment in Shares. Payments hereunder shall be made in whole Shares. Fractional
shares shall not be issuable hereunder, and when any provision hereof would otherwise entitle the
Participant to receive a fractional share the Fair Market Value of such fractional share shall be
paid to the Participant in cash.

     Section 2.7 Certain Equity Plan Provisions Inapplicable. The provisions of Section 9(c) of
the Equity Plan shall not apply to the Participant’s Deferral Agreements or these Deferral
Provisions.

ARTICLE 3

BENEFICIARY

     Each Participant shall have the right, at any time, to designate a beneficiary or
beneficiaries (each a “Beneficiary”) who will receive any payments with respect to any Deferred
Stock Units remaining in the Participant’s account at the time of his death. The Participant’s
Beneficiary designation shall become effective only when filed in writing with the Committee during
the Participant’s lifetime on a form prescribed by the Committee. The filing of a new Beneficiary
designation form will cancel all Beneficiary designations previously filed by the Participant. If
the Participant fails to designate a Beneficiary, or if he revokes his Beneficiary designation
without executing a new designation, or if the designated Beneficiary predeceases the Participant,
then the Company shall deliver any payments due on account of the Participant’s death to the
Participant’s estate.

ARTICLE 4

AMENDMENT AND TERMINATION OF AWARD AGREEMENT

     Section 4.1 Amendment or Termination. The Committee may at any time and from time to time
amend the provisions hereof, cease allowing Participants to defer fees pursuant hereto, or
terminate all aspects of this arrangement in its entirety; provided, however, that no such action
shall retroactively decrease the benefits payable to any Participant or Beneficiary under any
existing Deferral Agreement.

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     Section 4.2 Notice of Amendment or Termination. Within 60 days following a Committee action
pursuant to Section 4.1, the Committee shall give written notice thereof to the Participant.

     Section 4.3 Payments Upon Termination. Upon the Committee’s decision to terminate all aspects
of this arrangement in its entirety or to cease allowing Participants to defer fees pursuant
hereto, as of the last day of the calendar year in which the decision becomes effective each
Participant’s Deferral Agreement shall be of no further force and effect and no additional Deferred
Stock Units may be credited to his account for any reason but, rather, his Quarterly Retainers and
Meeting Fees will thereafter be payable to him when earned. In addition, to the extent permitted
by Code Section 409A and applicable guidance thereunder without triggering adverse tax consequences
to the Participant or his Beneficiary (other than inclusion of amounts payable in taxable income in
the year of termination), the Company shall redeem the Participant’s Deferred Stock Units into
Shares and deliver such Shares to the Participant as soon as administratively practicable following
the date of such termination. If the Company does not redeem the Participant’s Deferred Stock
Units into Shares in accordance with the prior sentence, such Deferred Stock Units will be payable
to the Participant in accordance with the other terms and conditions hereof.

ARTICLE 5

MISCELLANEOUS

     Section 5.1 Notices. Any notice or other communication given pursuant hereto shall be in
writing and shall be personally delivered, sent by overnight delivery service, or mailed by United
States registered or certified mail, postage prepaid, return receipt requested, to the following
addresses:

	 	 	 
	If to the Company:

	 	LSB Bancshares, Inc.
	

	 	One LSB Plaza
	

	 	Lexington, North Carolina 27293-0867
	

	 	Attention: Secretary
	 
	 	 
	If to Participant:

	 	Participant’s address of record with the Company.
(Participant agrees to notify the Company of any change
of address)

Notwithstanding the foregoing, the Company in its discretion may allow the Participant to provide
any notice or other communication pursuant to this Agreement in another form, including but not
limited to oral or electronic form.

     Section 5.2 Interpretation of Deferral Agreement and Deferral Provisions Consistent with
Deferred Compensation Rules. The Committee intends that amounts deferred by the Participant under
a Deferral Agreement shall not be included in the Participant’s income for federal, state or local
income tax purposes until benefits are actually paid or delivered to the Participant. Accordingly,
the Deferral Agreement and any installment payout or other election hereunder shall be interpreted
and administered consistently with the requirements of Code Section 409A, as amended or supplanted
from time to time, and current and future Internal

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Revenue Service guidance thereunder. Notwithstanding any provision hereof or within the
Participant’s Deferral Agreement to the contrary, the Committee shall have the power to amend these
Deferral Provisions from time to time without the consent of any other party to the extent the
Committee deems necessary or appropriate to preserve the intended tax treatment of amounts deferred
under a Deferral Agreement and/or installment payout or other election hereunder.

     Section 5.3 Unsecured General Creditor. Each Deferral Agreement is an unfunded arrangement
providing deferred compensation benefits. Neither the Participant nor his Beneficiaries shall have
any legal or equitable right, interest or claim in any specific property or assets of the Company,
nor shall the Participant or his Beneficiaries have any rights, claims or interests in any life
insurance policies, Shares or other assets (or the proceeds therefrom) owned or which may be
acquired by the Company. The assets of the Company shall not be held under any trust for the
benefit of the Participant or his Beneficiaries or held in any way as security for the fulfillment
of the obligations of the Company hereunder. With respect to benefits payable under a Deferral
Agreement and/or installment payout election, the Participant and his Beneficiaries are and shall
remain unsecured general creditors of the Company.

     Section 5.4 Nonassignability. Neither a Participant nor any other person shall have any right
to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate
or convey in advance of actual receipt any benefits payable under a Deferral Agreement and/or
installment payout election and all rights created herein are expressly declared to be
non-assignable and nontransferable. No part of the benefits payable under a Deferral Agreement
and/or installment payout election shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor shall any such benefits be transferable by operation of law in
the event of a Participant’s or any other person’s bankruptcy or insolvency.

     Section 5.5 Obligations to Company. At the time benefits are payable to the Participant or
Beneficiary pursuant to Article 2, any amount due to the Company from the Participant may be
deducted from such benefits. Such determination shall be made by the Committee.

     Section 5.6 No Shareholder Rights. The Participant shall not have any shareholder rights with
respect to Deferred Stock Units credited to his account pursuant hereto.

     Section 5.7 No Entitlement or Claims for Compensation. The deferral of fees contemplated
hereby is wholly discretionary in nature and is not to be considered part of the Participant’s
normal or expected compensation subject to severance, resignation, redundancy or similar
compensation.

     Section 5.8 Change in Capital Structure. The Deferred Stock Units are subject to adjustment
by the Committee as provided in the Equity Plan, including but not limited to Section 5(e) thereof.

     Section 5.9 Governing Law. This Agreement shall be governed by the internal laws of the State
of North Carolina.

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     Section 5.10 Compliance with Laws. The issuance of Shares upon redemption of Deferred Stock
Units shall be subject to compliance by the Company and the Participant with all applicable
requirements of law relating thereto and with all applicable regulations of the Nasdaq National
Market (or any stock exchange or automated trading system on which the Shares may be listed and
trading at the time of such issuance). The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the lawful issuance and
delivery of any Shares pursuant hereto shall relieve the Company of any liability with respect to
the non-issuance or delivery of the Shares as to which such approval shall not have been obtained.
The Company, however, shall use its reasonable efforts to obtain all such approvals.

     Section 5.11 Conflicts. In the event of any conflict between the provisions of the Equity
Plan as in effect on the date hereof and the provisions of these Deferral Provisions, the
provisions of the Equity Plan shall govern. All references herein to the Equity Plan shall mean
the Equity Plan as in effect on the date hereof.

     Section 5.12 Binding Effect. Subject to the limitations stated above and in the Equity Plan,
these Deferral Provisions shall be binding upon and inure to the benefit of the legatees,
distributees, and personal representatives of the Participant and the successors of the Company.

     IN WITNESS WHEREOF, the Company’s Stock Option and Compensation Committee, by its duly
authorized Chairman, has executed this instrument.

	 	 	 	 	 
	 

	 	LSB BANCSHARES, INC.

STOCK OPTION AND COMPENSATION COMMITTEE
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	 	 	R. B. Smith, Chairman
	 
	 	 	 	 
	

	 	Date:	 	 
	

	 	 	 	
 

9Ex-10.1

 

Exhibit 10.1

AMENDMENT NO. 6

TO

THE NACCO INDUSTRIES, INC.

UNFUNDED BENEFIT PLAN

(Effective September 1, 2000)

WITH RESPECT TO

THE AMERICAN JOBS CREATION ACT OF 2004

     WHEREAS, NACCO Industries, Inc. (the “Company”) adopted the Unfunded
Benefit Plan (the “Plan”) effective as of September 1, 2000 and has since
amended the Plan; and

     WHEREAS, the Plan is classified as a “nonqualified deferred compensation
plan” under the Internal Revenue Code of 1986, as amended (the “Code”); and

     WHEREAS, the American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”)
added a new Section 409A to the Code, which significantly changed the Federal
tax law applicable to “amounts deferred” under the Plan after December 31,
2004; and

     WHEREAS, pursuant to the AJCA, the Secretary of the Treasury and the
Internal Revenue Service will issue proposed, temporary or final regulations
and/or other guidance with respect to the provisions of new Section 409A of the
Code (collectively, the “AJCA Guidance”); and

     WHEREAS, the AJCA Guidance has not yet been issued; and

     WHEREAS, pursuant to Section 6.1 of the Plan, all amounts credited to a
Participant’s Account under the Plan are 100% vested; and

     WHEREAS, to the fullest extent permitted by Code Section 409A and the AJCA
Guidance, the Company wants to protect the “grandfathered” status of the Excess
Retirement Benefits that were deferred prior to January 1, 2005.

     NOW THEREFORE, the Company hereby adopts this Amendment No. 6 to the Plan,
which amendment is intended to (1) allow amounts deferred prior to January 1,
2005 (including any earnings thereon) to qualify for “grandfathered” status and
continue to be governed by the law applicable to nonqualified deferred
compensation, and the terms of the Plan as in effect, prior to the addition of
Code Section 409A and (2) cause amounts deferred after December 31, 2004 to be
deferred in compliance with the requirements of Code Section 409A.

Words used herein with initial capital letters that are defined in the Plan are
used herein as so defined.

Section 1

     Article I of the Plan is hereby amended by adding a new Section 1.5 to the
end thereof, to read as follows:

     “Section 1.5 American Jobs Creation Act (AJCA).

     (a) It is intended that the Plan (including all Amendments thereto) comply
with the provisions of Section 409A of the Code, as enacted by AJCA, so as to
prevent the inclusion in gross income of any Excess Retirement Benefit
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
Participants. The Plan shall be administered in a manner that will comply with
Section 409A of the Code, including any proposed,

 

 

temporary or final regulations or any other guidance issued by the Secretary of
the Treasury and the Internal Revenue Service with respect thereto
(collectively with the AJCA, the “AJCA Guidance”). Any Plan provisions
(including, without limitation, those added or amended by Amendment No. 6) that
would cause the Plan to fail to satisfy Section 409A of the Code shall have no
force and effect until amended to comply with Code Section 409A (which
amendment may be retroactive to the extent permitted by the AJCA Guidance).

     (b) The Plan Administrator shall not take any action that would violate
any provision of Section 409A of the Code. It is intended that, to the extent
applicable, all Participant elections hereunder will comply with Code Section
409A and the AJCA Guidance. The Plan Administrator is authorized to adopt
rules or regulations deemed necessary or appropriate in connection therewith to
anticipate and/or comply with the requirements thereof (including any
transition or grandfather rules thereunder). In this regard, the Plan
Administrator is authorized to permit Participant elections with respect to
amounts deferred after December 31, 2004 and is also permitted to allow the
Participants the right to amend or revoke such elections in accordance with the
AJCA Guidance.

     (c) The effective date of Amendment No. 6 to this Plan is January 1, 2005.
This Amendment creates additional Sub-Accounts (where necessary) (i) to
reflect amounts that are “deferred” (as such term is defined in the AJCA
Guidance) as of December 31, 2004 (and earnings thereon) (collectively, the
“Grandfathered Sub-Accounts”) and (ii) to reflect amounts that are deferred
after December 31, 2004 (and earnings thereon) (the “Post-2004 Sub-Accounts”).
Amendment No. 6 also modifies the distribution elections and provisions for the
Post-2004 Sub-Accounts to comply with the requirements of Code Section 409A.

     (d) In furtherance of, but without limiting the foregoing, any Excess
Retirement Benefit that is deemed to have been deferred prior to January 1,
2005 and that qualifies for “grandfathered status” under Section 409A of the
Code shall continue to be governed by the law applicable to nonqualified
deferred compensation prior to the addition of Section 409A to the Code and
shall be subject to the terms and conditions specified in the Plan as in effect
prior to the effective date of Amendment No. 6. In particular, to the extent
permitted under AJCA Guidance:

     (i) Amounts allocated to a Participant’s Excess 401(k) Sub-Account and
Excess Matching Sub-Account as of December 31, 2004 shall be credited to the
Participant’s Grandfathered Sub-Accounts and shall be paid under the terms of
the Plan as in effect prior to January 1, 2005; and

     (ii) Amounts allocated to a Participant’s Excess Profit Sharing Account as
of December 31, 2004 including, to the extent permitted by the AJCA Guidance,
the Excess Profit Sharing Benefit for the 2004 Plan Year (which is allocated to
Participants’ Accounts in 2005), shall be credited to the Participant’s
Grandfathered Sub-Account and shall be paid under the terms of the Plan as in
effect prior to January 1, 2005.”

Section 2

     Section 2.1 of the Plan is hereby amended by adding the following
sentences to the end thereof, to read as follows:

     “In addition, the Sub-Accounts shall be further subdivided as follows:
(a) the Excess Profit Sharing Sub-Account shall be divided into the Pre-2005
Excess Profit Sharing Sub-Account and the Post-2004 Excess Profit Sharing
Sub-Account; (b) the Excess 401(k) Sub-Account shall be divided into the
Pre-2005 Excess 401(k) Sub-Account and the Post-2004 Excess 401(k) Sub-Account
and (c) the Excess Matching Sub-Account shall be divided into the Pre-2005
Excess Matching Sub-Account and the Post-2004 Excess Matching Sub-Account. The
Pre-2005 Excess Profit Sharing Sub-Account, the Pre-2005 Excess 401(k) Sub-

2

 

Account and the Pre-2005 Excess Matching Sub-Account shall be referred to
herein collectively as the “Grandfathered Sub-Accounts” and the remainder of
such Sub-Accounts shall be referred to herein as the “Post-2004 Sub-Accounts.”

Section 3

     Section 2.5 of the Plan is hereby amended by adding the following new
sentence to the end thereof, to read as follows:

     “Notwithstanding the foregoing, the timing and crediting of Bonuses
hereunder shall be as specified in Section 3.2.”

Section 4

     Section 2.16 of the Plan is hereby amended by deleting the phrase “Profit
Sharing Plan” therein and replacing it with the phrase “Profit Sharing
Retirement Plan.”

Section 5

     Section 2.17 of the Plan is hereby amended in its entirety to read as
follows:

     “Section 2.17 Unforeseeable Emergency shall mean an event which results in
a severe financial hardship to the Participant as a consequence of (a) an
illness or accident of the Participant, the Participant’s spouse or a dependent
within the meaning of Code Section 152, (b) loss of the Participant’s property
due to casualty or (c) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant.”

Section 6

     Article II of the Plan is hereby amended by adding the following new
definitions to the end thereof, to read as follows:

     “Section 2.19 Bonus shall mean any bonus under any annual bonus plan that
would be taken into account as Compensation under the Profit Sharing Plan,
which is earned with respect to services performed by a Participant during a
Plan Year (whether or not such Bonus is actually paid to the Participant during
such Plan Year). An election to defer a Bonus under this Plan must be made
before the period in which the services are performed which gives rise to such
Bonus.

     Section 2.20 Disability or Disabled. A Participant shall be deemed to
have a “Disability” or be “Disabled” if the Participant (a) 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
(b) is, 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, receiving income replacement
benefits for a period of not less than three months under an Employer-sponsored
accident and health plan.

     Section 2.21 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 (as
long as the stock of which is publicly traded on an established securities
market or otherwise).

     Section 2.22 Termination of Employment means a separation of service as
defined in the AJCA Guidance issued under Code Section 409A.”

3

 

Section 7

     Section 3.2(a) of the Plan is hereby amended in its entirety to read as
follows:

     “(a) Amount of Excess 401(k) Benefits. Each 401(k) Employee who is a
Participant may, within 30 days after the Plan becomes effective as to him and
on or prior to each December 31st thereafter, by completing an approved
deferral election form, direct the Company to reduce his Compensation for the
balance of the Plan Year in which the Plan becomes effective as to him (but
only with respect to Compensation payable for periods of service commencing
after the 401(k) Employee so directs) or for the Plan Year following any such
December 31, respectively, by an amount equal to the difference between (i) a
specified percentage, in 1% increments, with a maximum of 25%, of his
Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions
actually permitted to be contributed for him to the Profit Sharing Plan for
such Plan Year by reason of the application of the limitations under Sections
402(g), 401(a)(17), 401(k)(3) and 414(v) of the Code. All amounts deferred
under this Section shall be referred to herein collectively as the “Excess
401(k) Benefits.” Notwithstanding the foregoing, a 401(k) Employee’s direction
to reduce a Bonus earned during a particular Plan Year shall be made no later
than December 31st of the Plan Year preceding the Plan Year in which the Bonus
commences to be earned (or, in the case of the first year in which a
Participant becomes eligible to participate in the Plan, within 30 days after
the Plan becomes effective as to him) and, as a result, Bonuses that are paid
in 2005 shall not be taken into account for purposes of calculating Excess
401(k) Benefits hereunder.”

Section 8

     Section 3.4(a) of the Plan is hereby amended by adding the following
paragraph after the second paragraph thereof to read as follows:

“Notwithstanding the foregoing, (1) distributions of Post-2004 Sub-Accounts
under the circumstances described in clauses (A) or (B) shall only be made in
the event of a Termination of Employment, (2) distributions of Post-2004
Sub-Accounts to Key Employees made on account of a Termination of Employment
may not be made before the date that is six months thereafter (or, if earlier,
the date of death) and (3) Participants may not elect a payment date that is
the “later of” the dates specified in clauses (A) through (E) above.”

Section 9

     Section 3.4(a) of the Plan is hereby amended by adding the following new
subsection (iii) to the end thereof, to read as follows:

     “(iii) Notwithstanding the foregoing, Participants shall be required to
make an election of a payment date for their Post-2004 Sub-Accounts by December
31, 2004 (or, if later, prior to their initial participation) and such
elections shall be made in accordance with the requirements of Code Section
409A.”

Section 10

     The fourth sentence of Section 3.4(b) of the Plan is hereby amended in its
entirety to read as follows:

“Notwithstanding the foregoing, a Participant must make a new deferral election
to participate in the Plan for the 2005 Plan Year.”

Section 11

4

 

     The first sentence of Section 3.4(c)(i) of the Plan is hereby amended by
adding the following new clause to the beginning thereof, to read as follows:

     “To the extent not prohibited by Code Section 409A,”

Section 12

     The first sentence of Section 3.4(c)(ii) of the Plan is hereby amended by
adding the following new clause to the beginning thereof, to read as follows:

     “To the extent permitted by Code Section 409A,”

Section 13

     Section 3.4(c)(iii) of the Plan is hereby amended in its entirety to read
as follows:

     “(iii) To the extent permitted by Code Section 409A, any Participant whose
eligibility to make Before-Tax Contributions to the Profit Sharing Plan has
been involuntarily suspended because he has taken a Hardship withdrawal from
such plan shall automatically not be eligible to defer Excess 401(k) Benefits
under this Plan for his period of suspension from the Profit Sharing Plan. As
a result, such a Participant’s deferral election hereunder shall automatically
be suspended for such time period and shall automatically be reinstated
following the end of such suspension (unless otherwise changed in accordance
with the terms of the Plan).”

Section 14

     Section 4.1 of the Plan is hereby amended by adding the following new
Subsection (g) to the end thereof, to read as follows:

     “(g) The Company shall make the above-described credits and debits to the
Participant’s Grandfathered Sub-Accounts or the Post-2004 Sub-Accounts, as
applicable, in accordance with Code Section 409A.”

Section 15

     Section 5.3(a) of the Plan is hereby amended in its entirety to read as
follows:

     “To the extent not prohibited by Code Section 409A, the Company (with the
approval or ratification of the NACCO Industries, Inc. Benefits Committee (the
“Benefits Committee”) may change (but not suspend) the earnings rate credited
on Accounts under the Plan at any time upon at least 30 days advance notice to
Participants.”

Section 16

     Section 7.1(a) of the Plan is hereby amended by adding the following
sentences to the end thereof, to read as follows:

     “Notwithstanding the foregoing, with respect to amounts allocated to a
Participant’s Post-2004 Excess Profit Sharing Sub-Account, (1) distributions
may only be made on account of a Termination of Employment and (2) with respect
to a Key Employee, a distribution on account of Termination of Employment may
not be made before the date which is six months after the date of the Key
Employee’s

5

 

Termination of Employment (or, if earlier, the date of death), to the extent
that Code Section 409A(a)(2)(B)(i) is applicable.”

Section 17

     Section 7.1(b) of the Plan is hereby amended by adding the following
clause (iv) to the end thereof, to read as follows:

     “(iv) Clauses (ii) and (iii) above shall not apply to a Participant’s
Post-2004 Excess 401(k) Sub-Account or Post-2004 Excess Matching Sub-Account.
The Participant shall elect a form of payment for such Sub-Accounts prior to
December 31, 2004 (or when the Plan first becomes applicable to him, if later).
He may elect to receive such Sub-Accounts in the form of a lump sum payment or
in the form of annual installment payments (for 10 or fewer years), with the
installment payments (if any) being calculated in accordance with the rules
specified in clause (ii). If the Participant does not make a timely election
regarding the form of payment, his Post-2004 Excess 401(k) Sub-Account and
Post-2004 Excess Matching Sub-Account shall be distributed in the form of a
single lump sum payment. Once made, the election (or deemed election) of a
form of payment under this clause (iv) shall be irrevocable except as specified
in the following sentences. Notwithstanding the foregoing, a Participant may
change his form of payment election (or deemed election) for his Post-2004
Excess 401(k) Sub-Account and Post-2004 Excess Matching Sub-Account by filing a
subsequent notice in writing, signed by the Participant and filed with the Plan
Administrator. However, unless otherwise permitted in accordance with Code
Section 409A, such election will not be effective unless (A) it is made not
less than twelve months prior to the date that distribution would have been
made absent such election, (B) the first payment under such election will be
made no less than five years from the date payment would have been made absent
such election (excluding distributions made on account of the death of the
Participant), (C) such election will not take effect until at least twelve
months after the date on which the election is made and (D) the election does
not accelerate the form of payment.”

Section 18

     The second sentence of Section 7.1(c) of the Plan is hereby amended in its
entirety to read as follows:

     “Payments made on account of an Unforeseeable Emergency 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 reasonably
anticipated as a result of the distribution) and 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).”

Section 19

     Section 7.1(e) of the Plan is hereby amended by adding the following
sentence to the beginning thereof:

     “The provisions of this Subsection (e) shall only apply to the amounts
that are allocated to the Participant’s Grandfathered Sub-Accounts.”

6

 

Section 20

     The last sentence of Section 7.1(f) of the Plan is hereby amended in its
entirety, to read as follows:

     “The Compensation Committee of the Board of Directors of the Company, in
its sole and absolute discretion, shall have the authority to waive this
payment restriction (in whole or in part) upon the written request of the
Participant, to the extent permitted by Code Section 409A.”

Section 21

     Section 7.1 of the Plan is hereby amended by adding the following new
Subsection (g) to the end thereof, to read as follows:

     “(g) Each of the foregoing provisions of this Section shall apply only to
the extent permitted by Code Section 409A.”

Section 22

     Section 8.3 of the Plan is hereby amended by adding the following new
Subsection (d) to the end thereof, to read as follows:

     “(d) Notwithstanding the foregoing, distributions to Beneficiaries of
amounts that are allocated to Participants’ Post-2004 Sub-Accounts shall be
made in a manner that satisfies the requirements of Code Section 409A.”

Section 23

     The first paragraph of Section 10.3 of the Plan is hereby amended by
deleting the last sentence thereof.

Section 24

     The first sentence of the third paragraph of Section 10.3 of the Plan is
hereby amended in its entirety to read as follows:

     “A claimant whose claim is denied (or his duly authorized representative) who
wants to contest that decision must file with the Plan Administrator a written
request for a review of such claim within 60 days after receipt of denial of a
claim.”

Section 25

     The fourth paragraph of Section 10.3 of the Plan is hereby amended by
deleting the last sentence thereof.

Section 26

     Section 10.5 of the Plan is hereby amended by (i) deleting the phrase “the
Committee” from the first sentence thereof, and replacing it with the phrase,
“the Company (with the approval or ratification of the Benefits Committee)” and
(ii) deleting the word “Committee” from the second sentence thereof and
replacing it with the phrase “Benefits Committee.”

7

 

Section 27

     A new Section 10.7 is hereby added to the end of the Plan, to read as
follows:

     “Section 10.7. The Company reserves the right to amend the Plan in any
respect, without the consent of any person, in order to comply with Code
Section 409A. The provisions of Articles IX and X shall apply only to the
extent permitted by Code Section 409A.”

     Executed
this 28th day of December, 2004.

	 	 	 	 	 
	 	 	NACCO INDUSTRIES, INC.
	 
	 	 	 	 
	

	 	By:	 	/s/ Charles A. Bittenbender
	

	 	 	 	

	 	 	Title: Vice President, General Counsel
and Secretary

8

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