Document:

EX-10.17

 

Exhibit 10.17

THE NORTH AMERICAN COAL CORPORATION

VALUE APPRECIATION PLAN FOR

YEARS 2006 TO 2015

(AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2008)

	1.	 	PURPOSE OF THE PLAN

     The purpose of this Value Appreciation Plan for Years 2006 to 2015 (“VAP” or the “Plan”) is to
further the long-term profits and growth of The North American Coal Corporation (the “Company”) by
offering long-term incentive to those officers and key management employees of the Company and its
Subsidiaries (the “Employers”) who will be in a position to make significant contributions to such
profits or growth. This incentive compensation is in addition to annual compensation and is
intended to reflect growth in the value of the Company.

	2.	 	CODE SECTION 409A

     All amounts payable under the Plan are subject to the provisions of Code Section 409A. It is
intended that the compensation arrangements under the Plan fully comply with the requirements of
Code Section 409A. The Plan shall be interpreted and administered in a manner to give effect to
such intent. Notwithstanding the foregoing, the Employers do not guarantee any particular tax
result to Participants or others with respect to the amounts deferred or payable hereunder,
including tax treatment under Code Section 409A.

	3.	 	DEFINITIONS

	 	(a)	 	“Account” means the account established in accordance with Section 8
hereof to reflect the Participant’s interest under the Plan.
	 
	 	(b)	 	“Award” means an award of a VAP Amount under the provisions of the
Plan.
	 
	 	(c)	 	“Change in Control” shall mean the occurrence of an event described in
Exhibit B hereto; provided that such occurrence occurs on or after January 1, 2008 and

 

 

	 	 	 	meets the requirements of Treasury Regulation Section 1.409A-3(i)(5) or any
successor or replacement thereto..

	 	(d)	 	“Committee” shall mean the Compensation Committee of the Company’s
Board of Directors or any other committee appointed by the Company’s Board of Directors
to administer the Plan in accordance with Section 4.
	 
	 	(e)	 	“Current Projects” shall mean the Company’s projects that existed on
January 1, 2006, such as Coteau, Falkirk, Sabine, Red River Mining, Mississippi Lignite
Mining, San Miguel, and Florida Dragline Operations.
	 
	 	(f)	 	“Disability” or “Disabled.” A Participant shall be deemed to
have a “Disability” or be “Disabled” if the Participant is determined to be totally
disabled by the Social Security Administration or if the Participant (i) 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 (ii) 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.
	 
	 	(g)	 	“Earnings Before Interest After Tax” or “EBIAT” shall mean (i)
total net income for all projects, plus (ii) total interest expense incurred by all
projects, less (iii) total interest expense incurred by all projects times the
applicable effective tax rate for each project. EBIAT shall exclude the effect of
extraordinary items and

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	 	 	 	accounting method changes as determined under U.S. generally accepted accounting
principles.

	 	(h)	 	“Key Employee.” Effective April 1, 2008, a Participant shall be
classified as a Key Employee if he meets the following requirements:

	 	•	 	The Participant, with respect to the Participant’s relationship
with the Employers and their affiliates, met the requirements of
Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (without regard to
Section 416(i)(5) thereof) and the Treasury Regulations issued
thereunder at any time during the 12-month period ending on the most
recent Identification Date (defined below) and his Separation from
Service occurs during the 12-month period beginning on the most
recent Effective Date (defined below). When applying the provisions
of Code Section 416(i)(1)(A)(i), (ii) or (iii) for this purpose: (1)
the definition of “compensation” (A) shall be as defined in Treasury
Regulation 1.415(c)-2(d)(4) (i.e., the wages and other compensation
for which the Employer is required to furnish the Participant with a
Form W-2 under Code Sections 6041, 6051 and 6052, plus amounts
deferred at the election of the Employee under Code Sections 125,
132(f)(4) or 401(k)) and (B) shall apply the rule of Treasury
Regulation Section 1.415-2(g)(5)(ii) which excludes compensation of
non-resident alien employees and (2) the number of officers described
in Code Section 416(i)(1)(A)(i) shall be 60 instead of 50.
	 
	 	•	 	The Identification Date for Key Employees is each December
31st and the Effective Date is the following April
1st. As such, any Participant who is classified as a Key
Employee as of December 31st of a particular calendar year
shall maintain such classification for the 12-month period commencing
on the following April 1st.
	 
	 	•	 	Notwithstanding the foregoing, a Participant shall not be
classified as a Key Employee unless the stock of NACCO Industries,
Inc. (or a related entity) is publicly traded on an established
securities market or otherwise on the date of the Participant’s
Separation from Service.

	 	(i)	 	“New Projects” shall mean any new mining activities or projects
established after January 1, 2006, such as a new lignite or coal mining project,
limerock mining project or any mining services agreement, expansions at current
operations, and

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	 	 	 	other new projects and activities, where approval of the Company’s Board of
Directors is obtained.

	 	(j)	 	“Plan Term” shall mean the ten (10) year period from January 1, 2006
through December 31, 2015.
	 
	 	(k)	 	“Salary Grade” shall mean the salary grade assigned to a Plan
Participant by the Company.
	 
	 	(l)	 	“Separation From Service” means, with respect to any Participant’s
relationship with the Employers and their affiliates, a separation from service as
defined in Code Section 409A (and the regulations and guidance issued thereunder).
	 
	 	(m)	 	“Subsidiary” shall mean any corporation, partnership or other entity
the majority of the outstanding voting securities of which is owned, directly or
indirectly, by the Company.
	 
	 	(n)	 	“Value Appreciation” shall mean an amount equal to EBIAT less a capital
charge which is ten percent (10%) of the book value of the entity.
	 
	 	(o)	 	“VAP Amount” shall mean a Plan Participant’s VAP Target Amount times a
VAP Multiplier, as determined in accordance with Section 9.
	 
	 	(p)	 	“VAP Goals for Current Projects” shall mean the expected total Value
Appreciation for all Current Projects for the Employers over the Plan Term as
determined by the Committee. In the case of New Projects, the forecast of VAP
performance used for the New Project Award as determined in accordance with Section
9(c) shall be included in all future years following the year the Participants are
credited with a New Project Award.

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	 	(q)	 	“VAP Goal for New Projects” shall be the cumulative amount of Value
Appreciation to be obtained over the Plan Term from New Projects, as determined by the
Committee.
	 
	 	(r)	 	“VAP Multiplier” shall mean a factor based on VAP Ratio as further
described herein.
	 
	 	(s)	 	“VAP Percentage” shall mean a percentage of the Plan Participant’s
salary range midpoint, and shall be determined for each Plan Participant by the
Committee.
	 
	 	(t)	 	“VAP Ratio” shall mean a factor determined based on actual performance
versus VAP Goals as further described herein.
	 
	 	(u)	 	“VAP Target Amount” shall mean (i) a dollar amount equal to the VAP
Percentage for a Plan Participant’s Salary Grade times the Plan Participant’s salary
range midpoint or (ii) such amount as otherwise determined by the Committee.
	 
	 	(v)	 	“VAP Targets for New Projects” shall mean those targets calculated
based on the expected capital investment and EBIAT projections that are used, in good
faith as realistic best estimates, to obtain Management approval of the New Project.

	4.	 	ADMINISTRATION

     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 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 the Plan. 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

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be conclusive, final and binding upon the Company and all present and former Participants, all
other employees of the Employers, 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.

	5.	 	ELIGIBILITY

     Any person who is classified as a salaried employee of the Employers (including any Subsidiary
acquired after adoption of this Plan) generally at a Salary Grade no lower than 14 (effective as of
January 1, 2007), who in the judgment of the Committee occupies an officer or other key management
position in which his efforts may significantly contribute to the profits or growth of the
Employers may receive an Award under this Plan. Directors of the Employers who are not also
classified as employees of the Employers are not eligible to participate in this Plan. Any person
receiving an Award shall be referred to as a “Participant.”

	6.	 	VAP AMOUNTS/VESTING/PAYMENT

     6.1 Awards. As to each Award under this Plan, the Committee shall determine and
approve (a) the VAP Target Amount that may be awarded for each Salary Grade, (b) the employees to
whom VAP Amounts are to be awarded and (c) the VAP Amount to be awarded to each individual
employee. All Awards under this Plan shall be credited to a Participant’s Account as of the
January 1 of the year in which the Award is approved by the Committee. Each Award shall vest and
the amount represented thereby shall be payable upon the terms and conditions set forth in Section
6.2.

	 	6.2	 	Vesting; Payment of VAP Amounts.

     (a) Each Participant’s interest in his VAP Account shall vest at the rate of 20 percent for
each year during which a Participant remains in the continuous employ of the Employers following
the January 1st of the year in which a Participant is first credited with a VAP Target
Amount under the Plan; provided, however, a Participant’s interest in his VAP Account shall

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become immediately 100 percent vested in the event (i) of such Participant’s death or
Disability while employed by the Employers, (ii) of a Change in Control, (iii) of a termination of
the Plan, (iv) such Participant remains in the continuous employ of the Employers through December
31, 2015, or (v) of such Participant’s Separation From Service with the Employers at or after age
55 with at least 10 years of service or at or after age 65 (i.e., retirement). Notwithstanding the
foregoing, the Committee may vest a Participant whose employment otherwise terminates in such
amounts, up to 100% of his VAP Account, as the Committee may in its sole discretion determine;
provided that such vesting shall not result in the acceleration of the payment of the VAP Account
to a date earlier than the dates specified in Section 6.2(b) or Section 6.3 hereof. In the event
that all or any portion of a Participant’s VAP Account does not vest pursuant to the foregoing
provisions, the non-vested portion of the VAP Account shall terminate and be forfeited.

     (b) Subject to the provisions of Sections 6.2(c), 6.3 and Section 6.4 hereof, a Participant
shall become entitled to receive payment of the vested amounts in his VAP Account on the earliest
to occur of:

	 	(i)	 	December 31, 2015;
	 
	 	(ii)	 	A Change in Control;
	 
	 	(iii)	 	the date of a Participant’s Separation From Service for death,
Disability or retirement (as defined above); provided, however, that if the
Participant is a Key Employee, such payment shall be delayed until the
1st day of the 7th month following a Separation from
Service on account of retirement or Disability (with interest continuing to
accrue until the actual payment date); or
	 
	 	(iv)	 	the termination of this Plan pursuant to Section 9, to the
extent permitted by Code Section 409A.

     (c) Notwithstanding the foregoing, all payments under this Plan (including payments of vested
amounts) must be approved by the Committee before such payment is made. Such

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Committee approval will be received, and the actual payment will be made, within 90 days of,
the applicable payment date specified in Subsection (b) above; provided, however, that in the event
of a Change in Control, such payment shall be made within 30 days prior to, or 2 days after, such
Change in Control. The Participant’s Employer shall deliver to the Participant or, if applicable,
his designated beneficiaries (or, if none, his estate) a check in full payment of the amount
represented by the Participant’s vested interest in his VAP Account. The Employer by which the
Participant was last employed prior to the payment date of the Account shall be liable for the
payment of such Account to or on behalf of such Participant, but such Employer’s liability shall be
limited to its proportionate share of such Account, as hereinafter provided. If the Award(s) that
were credited to a Participant’s VAP Account are based on the Participant’s employment with more
than one Employer, the liability for such payment shall be shared by all such Employers (by
reimbursement to the Employer making such payment(s)) as determined by the Company (taking into
consideration the Participant’s service and compensation paid by each such Employer) and as will
permit the income tax deduction by each such Employer of its portion of the payments made and to be
made hereunder.

     (d) The amounts payable under this Plan shall be calculated as of a valuation date determined
by the Committee, and in the absence of such determination, shall be calculated based on the value
of the VAP Account as of the December 31 coincident with or immediately preceding the date of
payment.

     (e) There shall be deducted from each payment the amount of any tax required by any
governmental authority to be withheld and paid by the Employer to such governmental authority for
the account of the person entitled to such payment.

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     6.3 Forfeiture/Account Adjustments. Notwithstanding anything to the contrary
contained in this Plan, (a) in the event a Participant shall intentionally commit an act materially
adverse to the interests of the Employers, and the Board of Directors of the Company or the
Committee shall so find, any outstanding Award shall be deemed to have terminated at the time of
such act and his interest in his VAP Account shall immediately be terminated and forfeited and (b)
the Committee shall have the sole and absolute discretion to reduce a Participant’s vested interest
in his VAP Account, in the event the Committee determines that an adjustment is required to be made
under Section 9(e) hereof (provided, however, that the Committee shall not have the discretion to
reduce the amount of, or obtain repayment of, any Award that was previously paid to a Participant
hereunder).

	7.	 	ASSIGNABILITY

     No Award payable to an employee under this Plan shall be transferable by him for any reason
whatsoever; provided, however, that the right to the proceeds of an Award which are payable upon
vesting pursuant to Section 6.2 may be transferred by will or the laws of descent and distribution.
No right or interest of a Participant or Beneficiary in a VAP Account hereunder shall be
assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge,
encumbrance or other legal process or in any manner be liable for or subject to the debts or
liabilities of the Participant or beneficiary.

	8.	 	VAP ACCOUNTS

     (a) The Company shall maintain an account (“VAP Account”) on its books and records in the name
of each Participant to reflect the Participant’s interest under this Plan. The VAP Account of each
Participant shall be adjusted in accordance with the provisions of Sections 6 and 9 hereof. Each
Participant’s VAP Account also shall be credited with earnings as

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determined in accordance with provisions of this Section 8 and shall be debited for any
distributions made to the Participant from his VAP Account.

     (b) As of the end of each calendar year, each Participant’s VAP Account shall be credited with
an amount determined by multiplying the Participant’s average VAP Account balance during such year
by the average monthly rate during such year for 10-year U.S. Treasury Bonds. In the event that a
Participant becomes entitled to a payment of his VAP Account prior to the end of a calendar year,
the Participant’s VAP Account shall be credited with a pro-rata share of earnings, based on the
portion of the year prior to the payment date.

     (c) The Vice President — Financial Services of the Company (or his delegate) shall keep an
accurate record of the amounts credited or debited to each Participant’s VAP Account and, as of
December 31 of each year, shall deliver to each Participant a written statement showing the credits
and debits made during the year to this VAP Account and the accumulated balance thereof.

	9.	 	CALCULATION OF VALUE APPRECIATION; ADJUSTMENTS OF VAP AMOUNTS

     Value Appreciation and all VAP Amounts to be credited to a Participant’s VAP Account under
this Plan shall be determined based on the actual performance of Current Projects and on the
acquisition and actual performance of New Projects as hereinafter described. Following the
acquisition of New Projects, the VAP Targets for New Projects shall be included in the VAP Goals
for Current and New Projects.

	 	(a)	 	Annual Value Appreciation of Current and New Projects

          As of December 31 of each year, the amount to be credited to a Participant’s VAP Account based
on the annual Value Appreciation of all Current and New Projects shall be determined as follows:

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VAP Amount for Annual Value Appreciation of all Current and New Projects

= VAP Multiplier x 30% x VAP Target Amount

where

     VAP Multiplier = (4 x VAP Ratio) -3

where

	 	 	 	 	 	 	 	 	 
	 

	 	VAP Ratio
	 	=
	 	Total actual annual Value Appreciation of all Current and New Projects
	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Total annual VAP Goal of all Current Projects	 	 
	 

	 	 	 	 	 	(including VAP Targets for New Projects)	 	 

          However, if the VAP Multiplier calculated above is less than 0, it shall be 0, and if greater
than 2.00, it shall be 2.00. See Exhibit A hereto.

	 	(b)	 	Cumulative Value Appreciation of Current and New Projects

As of December 31 of each year, the amount to be credited to a Participant’s VAP Account based on
the cumulative Value Appreciation of all Current and New Projects from the beginning of the Plan
Term (or from the beginning of a Participant’s participation in this Plan, if later) shall be
determined as follows:

VAP Amount for Cumulative Value Appreciation of all Current and New Projects

= VAP Multiplier x 30% x VAP Target Amount

where

     VAP Multiplier = (4 x VAP Ratio) — 3

where

	 	 	 	 	 	 	 	 	 
	 

	 	VAP Ratio
	 	=
	 	Actual cumulative Value Appreciation of all Current and New Projects
	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Cumulative VAP Goal of all Current Projects	 	 
	 

	 	 	 	 	 	(including VAP Targets for New Projects)	 	 

          However, if the VAP Multiplier calculated above is less than 0, it shall be 0, and if greater
than 2.00, it shall be 2.00. See Exhibit A attached hereto.

	 	(c)	 	VAP Amounts for the Acquisition of New Projects

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          The acquisition of a New Project for purposes of this Plan shall be determined by the
Committee. The amount to be credited to a Participant’s VAP Account for the Acquisition of a New
Project shall be determined as follows:

VAP Amount for the Acquisition of New Projects

= VAP Multiplier x 40% x VAP Target Amount x 10

where

	 	 	 	 	 	 	 	 	 
	 

	 	VAP Multiplier
	 	=
	 	A
	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	B	 	 

where

	 	A =	 	the present value of the expected cumulative Value

Appreciation of all New Projects for the actual expected term(s) of the New Project(s)
based on an annual discount factor of 10%, and
	 
	 	B = 	 	the total VAP Goal for New Projects over the Plan Term as determined by the Committee.

          The expected cumulative Value Appreciation for each New Project shall be reviewed from time to
time and the VAP Amount for the Acquisition of the New Projects shall be adjusted, as appropriate
(including, without limitation, adjustments for amounts previously credited to the VAP Account).
Any earnings on such VAP Amount during the period between reviews shall not be adjusted.

	 	(d)	 	Total VAP Amount for Current and New Projects

          The total VAP Amount to be credited to each Participant’s VAP Account shall be determined as
of December 31 of each year by adding the VAP Amounts for Current and New Projects (as determined
under Section 9(a) and 9(b)) to the VAP Amounts for the Acquisition of New Projects (as determined
under Section 9(c)).

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	 	(e)	 	Committee Discretion

          Notwithstanding the provisions of this Plan, the Committee, in its sole discretion, may make
equitable adjustments by increasing or decreasing the VAP Amount to be credited (or that was
previously credited) to a Participant’s VAP Account or may approve an Award where one otherwise
would not be made.

	10.	 	AMENDMENT AND TERMINATION

     (a) The Committee or the Board of Directors of the Company, in its sole and absolute
discretion, may alter or amend this Plan from time to time; provided, however, that no such
amendment shall, without the consent of a Participant, affect the Participant’s rights in or the
amount of any outstanding Award of such Participant (except as otherwise permitted under the terms
of the Plan).

     (b) The Committee or the Board of Directors of the Company, in its sole and absolute
discretion, may terminate this Plan in its entirety (or a portion thereof) at any time; provided
that, except as provided in this Subsection, no such termination shall, without the consent of a
Participant, affect the Participant’s rights in or the amount of any outstanding Award of such
Participant (except as otherwise permitted under the terms of the Plan). Except as otherwise
provided in an amendment to the Plan, all Awards granted prior to any termination of this Plan
shall continue to be subject to the terms of this Plan. Notwithstanding the foregoing, upon a
termination of the Plan (or any portion thereof), the Committee or the Board of Directors of the
Company, in its sole and absolute discretion, shall have the right to change the time of
distribution of any or all Participants’ Awards under the Plan, including requiring that all
amounts credited to Participants’ Accounts be immediately distributed; provided such action does
not otherwise violate the requirements of Code Section 409A.

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     (c) Any amendment or termination of the Plan shall be in the form of a written instrument
approved and adopted on the order of the Committee or the Board of Directors of the Company. Such
amendment or termination shall become effective as of the date specified in the instrument or, if
no such date is specified, on the date of its adoption.

	11.	 	GENERAL PROVISIONS

     (a) Expenses. Expenses of administering the Plan shall be paid by the Employers, as
directed by the Company.

     (b) No Guarantee of Employment. Neither the adoption or operation of this Plan, nor
any document describing or referring to the Plan, or any part thereof, shall confer upon any
employee any right to continue in the employ of the Company or any Subsidiary, or shall in any way
affect the right and power of the Company or any Subsidiary to terminate the employment of any
employee at any time with or without assigning a reason therefore to the same extent as the Company
or a Subsidiary might have done if this Plan had not been adopted.

     (c) Applicable Law. The provisions of the Plan shall be governed by and construed in
accordance with the laws of the State of Texas, except when pre-empted by Federal law.

     (d) 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 Employers from all
liability with respect to such Award.

     (e) Limitation of Rights of Participants; No Lien. No trust has been created by the
Employers for the payment of VAP Amounts granted under this Plan; nor have the Participants

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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 Employers and each Participant
hereunder is an unsecured creditor of his Employer.

     (f) Headings/Construction. Headings are given to the sections of the 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 the 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 with its meaning the plural, and vise versa. If any
provision of this Plan or the application thereof to any circumstance or person is held to be
invalid by a court of competent jurisdiction, the remainder of the Plan and the application of such
provision to other circumstances or persons shall not be affected thereby.

     (g) Acceleration of Payments. Notwithstanding any provision of the Plan to the
contrary, to the extent permitted under Code Section 409A and the Treasury Regulations issued
thereunder, payments of Accounts hereunder may be accelerated (i) to the extent necessary to comply
with federal, state, local or foreign ethics or conflicts of interest laws or agreements, (ii) to
the extent necessary to pay the FICA taxes imposed under Code Section 3101, and the income
withholding taxes related thereto or (iii) if the Plan (or a portion thereof) fails to satisfy the
requirements of Code Section 409A; provided that the amount of such payment may not exceed the
amount required to be included as income as a result of the failure to comply with Code Section
409A.

     (h) Delayed Payments due to Solvency Issues. Notwithstanding any provision of the
Plan to the contrary, an Employer shall not be required to make any payment hereunder to any
Participant or beneficiary if the making of the payment would jeopardize the ability of the

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Employer to continue as a going concern; provided that any missed payment is made during the
first calendar year in which the funds of the Employer are sufficient to make the payment without
jeopardizing the going concern status of the Employer.

     (i) Payments Violating Applicable Law. Notwithstanding any provision of the Plan to
the contrary, the payment of all or any portion of the amounts payable hereunder will be deferred
to the extent that the Employer reasonably anticipates that the making of such payment would
violate Federal securities laws or other applicable law (provided that the making of a payment that
would cause income taxes or penalties under the Code shall not be treated as a violation of
applicable law). The deferred amount shall become payable at the earliest date at which the
Employer reasonably anticipates that making the payment will not cause such violation.

	12.	 	EFFECTIVE DATE

     The effective date of this amended and restated Plan is January 1, 2008.

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EXHIBIT A

	 	 	 
	VAP RATIO	 	VAP MULTIPLIER
	 	 	 
	0.00
	 	0.0
	 	 	 
	0.75
	 	0.0
	 	 	 
	0.85
	 	0.4
	 	 	 
	0.95
	 	0.8
	 	 	 
	1.00
	 	1.0
	 	 	 
	1.05
	 	1.2
	 	 	 
	1.15
	 	1.6
	 	 	 
	1.25
	 	2.0
	 	 	 
	1.50
	 	2.0

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Exhibit B — Change in Control.

Change in Control. The term “Change in Control” shall mean the occurrence of any of
the events listed in I or II, below; provided that such occurrence occurs on or after
January 1, 2008 and meets the requirements of Treasury Regulation Section 1.409A-3(i)(5) (or
any successor or replacement thereto) with respect to a Participant:

	 	 	 	 	 	 	 
	 

	 	I.
	 	i.
	 	Any “Person” (as such term is used in Sections 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), other than one or more Permitted Holders (as defined below), is or
becomes the “beneficial owner"(as defined in Rules 13d-3 and 13d-5 of the
Exchange Act), directly or indirectly, of more than 50% of the combined voting
power of the then outstanding voting securities of a Related Company (as
defined below) entitled to vote generally in the election of directors (the
“Outstanding Voting Securities”), other than any direct or indirect
acquisition, including but not limited to an acquisition by purchase,
distribution or otherwise, of voting securities by any Person pursuant to an
Excluded Business Combination (as defined below); or
	 
	 	 	 	 	 	 
	 

	 	 	 	ii.
	 	The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of any Related Company or the acquisition of assets of another
corporation, or other transaction involving a Related Company (“Business
Combination”) excluding, however, such a Business Combination pursuant to
which (such a Business Combination, an “Excluded Business Combination”) the
individuals and entities who beneficially owned, directly or indirectly,
more than 50% of the combined voting power of any Related Company
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 50% of the combined voting power of the then
Outstanding Voting Securities of the entity resulting from such Business
Combination (including, without limitation, an entity that as a result of
such transaction owns any Related Company or all or substantially all of
the assets of any Related Company, either directly or through one or more
subsidiaries).
	 
	 	 	 	 	 	 
	 

	 	II.
	 	i.
	 	Any “Person” (as such term is used in Sections
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), other than one or more Permitted Holders, is or becomes the
“beneficial owner"(as defined in Rules 13d-3 and 13d-5 of the Exchange Act),
directly or indirectly, of more than 50% of the combined voting power of the
then Outstanding Voting Securities of NACCO Industries, Inc. (“NACCO”), other
than any direct or indirect acquisition, including but not limited to an
acquisition by purchase, distribution or otherwise, of voting securities:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	(A)   directly from NACCO that is approved by a majority
of the Incumbent Directors (as defined below); or

	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	(B)   by any Person pursuant to an Excluded NACCO
Business Combination (as defined below);

-18-

 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	provided, that if at least a majority of the individuals who constitute
Incumbent Directors determine in good faith that a Person has become the
“beneficial owner"(as defined in Rules 13d-3 and 13d-5 of the Exchange Act)
of more than 50% of the combined voting power of the Outstanding Voting
Securities of NACCO inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares so that such Person is the
“beneficial owner"(as defined in Rules 13d-3 and 13d-5 of the Exchange Act)
of 50% or less of the combined voting power of the Outstanding Voting
Securities of NACCO, then no Change in Control shall have occurred as a
result of such Person’s acquisition; or
	 
	 	 	 	 	 	 
	 

	 	 	 	ii.
	 	a majority of the Board of Directors of NACCO ceases to
be comprised of Incumbent Directors; or
	 
	 	 	 	 	 	 
	 

	 	 	 	iii.
	 	the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of NACCO or the acquisition of assets of another corporation, or
other transaction involving NACCO (“NACCO Business Combination”) excluding,
however, such a Business Combination pursuant to which both of the
following apply (such a Business Combination, an “Excluded NACCO Business
Combination”):
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	(A)   the individuals and entities who beneficially
owned, directly or indirectly, NACCO immediately prior to such NACCO
Business Combination beneficially own, directly or indirectly, more
than 50% of the combined voting power of the then Outstanding Voting
Securities of the entity resulting from such NACCO Business Combination
(including, without limitation, an entity that as a result of such
transaction owns NACCO or all or substantially all of the assets of
NACCO, either directly or through one or more subsidiaries); and

	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	(B)   at the time of the execution of the initial
agreement, or of the action of the Board of Directors of NACCO,
providing for such NACCO Business Combination, at least a majority of
the members of the Board of Directors of NACCO were Incumbent Directors.

	 
	 	 	 	 	 	 
	 

	 	III.
	 	 	 	Definitions. The following terms as used herein shall be
defined as follow:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	1.   “Incumbent Directors” means the individuals
who, as of December 31, 2007, are Directors of NACCO and any individual
becoming a Director subsequent to such date whose election, nomination for
election by NACCO’s stockholders, or appointment, was approved by a vote of
at least a majority of the then Incumbent Directors (either by a specific
vote or by approval of the proxy statement of NACCO in which such person is
named as a nominee for director, without objection to such nomination);
provided, however, that an individual shall not be an
Incumbent Director if such individual’s election or appointment to the
Board of Directors of NACCO occurs as a result of an actual or threatened
election contest (as described in Rule 14a-12(c) of the Exchange Act) with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person
other than the Board of Directors of NACCO.

-19-

 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	2.   “Permitted Holders” shall mean, collectively,
(i) the parties to the Stockholders’ Agreement, dated as of March 15, 1990,
as amended from time to time, by and among National City Bank, (Cleveland,
Ohio), as depository, the Participating Stockholders (as defined therein)
and NACCO; provided, however, that for purposes of this definition only,
the definition of Participating Stockholders contained in the Stockholders’
Agreement shall be such definition in effect of the date of the Change in
Control, (ii) any direct or indirect subsidiary of NACCO and (iii) any
employee benefit plan (or related trust) sponsored or maintained by NACCO
or any direct or indirect subsidiary of NACCO.

	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	3.   “Related Company” means The North American
Coal Corporation and its successors (“NA Coal”), any direct or indirect
subsidiary of NA Coal and any entity that directly or indirectly controls
NA Coal.

-20-exv10w27

 

Exhibit 10.27

EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT (this “Agreement”) executed on December 18, 2007 as of December 1, 2007
(the “Effective Date”), by and between SYNTAX-BRILLIAN CORPORATION, a Delaware corporation (the
“Company”), and JAMES LI (“Executive”).

RECITALS

          A. Executive is employed under an employment agreement as President and Chief Operating
Officer of the Company.

          B. On September 30, 2007, the Board of Directors appointed Executive as Chief Executive
Officer of the Company, with Executive also retaining his role of President of the Company.

          C. The Company and Executive desire to confirm the terms and conditions set forth in this
Agreement, which on the Effective Date shall replace any existing employment arrangements between
the Company and Executive.

AGREEMENT

          NOW, THEREFORE, in consideration of the mutual promises, terms, covenants, and conditions set
forth herein and the performance of each, it is hereby agreed as follows:

          1. Employment and Duties.

               (a) Employment. The Company hereby employs Executive, and Executive hereby agrees to act, as
the President and Chief Executive Officer of the Company. As such, Executive shall have
responsibilities, duties, and authority reasonably accorded to, expected of, and consistent with
Executive’s position. Executive hereby accepts this employment upon the terms and conditions
herein contained and agrees to devote Executive’s best efforts and, subject to paragraph l(c)
hereof, substantially all of Executive’s business time and attention to promote and further the
business of the Company. Executive shall provide such services to the Company’s subsidiaries as
may be requested from time to time by the Board of Directors without additional compensation.

               (b) Policies. Executive shall faithfully adhere to, execute, and fulfill all lawful policies
established by the Company.

               (c) Other Activities. Executive shall not, during the term of Executive’s employment
hereunder, be engaged in any other business activity pursued for gain, profit, or other pecuniary
advantage if such activity interferes in any material respect with Executive’s duties and
responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting
Executive from (i) making personal investments in such form or manner as will neither require
Executive’s services in the operation or affairs of the companies or enterprises in which such
investments are made nor subject Executive to any conflict of interest with respect to Executive’s
duties to the Company; (ii) serving on any civic or charitable boards

 

 

or committees; (iii) delivering lectures or fulfilling speaking engagements; or (iv) serving,
on the boards of directors of public corporations on which Executive currently serves and with the
written approval of the Board, as a director of one or more other public corporations, in each case
so long as any such new activities do not significantly interfere with the performance of
Executive’s responsibilities under this Agreement.

               (d) Place of Performance. Executive shall not be required by the Company or by the
performance of Executive’s duties under this Agreement either to relocate Executive’s primary
residence or to perform Executive’s principal duties at a work location more than 25 miles from the
principal office at which Executive renders services as of the Effective Date.

          2. Compensation. For all services rendered by Executive, the Company shall compensate
Executive as follows:

               (a) Base Salary. Effective on the Effective Date, the base salary payable to Executive shall
be $340,000 per year, payable on a regular basis in accordance with the Company’s standard payroll
procedures, but not less than monthly. On at least an annual basis, the Board or a committee of
the Board shall review Executive’s performance and may make changes to such base salary if, in its
sole discretion, any such change is warranted. In no event, however, shall Executive’s base salary
be reduced to a level below the base salary provided for in this Agreement.

               (b) Bonus or other Incentive Compensation. Executive shall be eligible to receive a bonus or
other incentive compensation as may be determined by the Board or a committee of the Board based
upon such factors as the Board or such committee, in its sole discretion, may deem relevant,
including, without limitation, the performance of Executive and the Company; provided, however,
that the Board or a committee of the Board shall establish for each fiscal year of the Company
either (i) a bonus program in which Executive shall be entitled to participate, which provides
Executive with a reasonable opportunity, based on the past compensation practices of the Company
and Executive’s then base salary, to maintain or increase Executive’s total compensation compared
to the previous fiscal year or (ii) a targeted bonus based on such factors as the Board may
determine (the “Targeted Bonus”).

               (c) Executive Perquisites, Benefits, and Other Compensation. Executive shall be entitled to
receive additional benefits and compensation from the Company in such form and to such extent as
specified below:

                    (i) Insurance Coverage. Payment of all premiums for coverage for Executive and Executive’s
dependent family members under all health, hospitalization, disability, dental, life, and other
insurance plans that the Company may have in effect from time to time, with the benefits provided
to Executive to be on terms no less favorable than the benefits provided to other Company executive
officers but with any generally applicable limitations, such as co-payment provisions.

                    (ii) Reimbursement for Expenses. Reimbursement for business travel and other out-of-pocket
expenses reasonably incurred by Executive in the

2

 

performance of Executive’s services under this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Executive upon submission of any request for
reimbursement and shall be in a format and manner consistent with the Company’s expense reporting
policy.

                    (iii) Vacation. Paid vacation in accordance with the applicable policy of the Company as in
effect from time to time for senior executives, but in no event shall Executive be entitled to less
than two weeks paid vacation per year.

                    (iv) Other Executive Perquisites. The Company shall provide Executive with other executive
perquisites as may be made available to or deemed appropriate for Executive by the Board or a
committee of the Board and participation in all other Company-wide employee benefits as are
available to the Company’s executives from time to time, including any plans, programs, or
arrangements relating to retirement, deferred compensation, profit sharing, 401(k), and employee
stock ownership. Any options granted after the date hereof to Executive to purchase Common Stock
of the Company shall provide by their terms that such options shall vest immediately upon, and
shall be exercisable for a period of two years after, a termination of employment of Executive by
the Company without Good Cause, by Executive with Good Reason, or as a result of a Change in
Control.

          3. Non-Competition Agreement.

               (a) Non-Competition. Notwithstanding the provisions of California law, including, without
limitation, Bus. & Prof. Code Secs. 16600 et. seq. and 17200 et. sec., the parties agree that,
during the period of Executive’s employment by the Company, and for a period equal to the time
during or for which severance payments are being made by the Company to Executive in accordance
with this Agreement, Executive shall not, directly or indirectly, for himself or on behalf of or in
conjunction with any other person:

                    (i) Other Activities. Engage, as an officer, director, shareholder, owner, principal,
partner, lender, joint venturer, employee, independent contractor, consultant, advisor, or sales
representative, in any Competitive Business within the Restricted Territory;

                    (ii) Solicitation of Employees. Call upon any person who is, at that time, within the
Restricted Territory, an employee of the Company or any of its subsidiaries, in a managerial or
supervisory capacity for the purpose or with the intent of enticing such employee away from or out
of the employ of the Company or any of its subsidiaries;

                    (iii) Solicitation of Customers. Call upon any person who is, at that time, or who has been,
within one year prior to that time, a customer of the Company or any of its subsidiaries, within
the Restricted Territory for the purpose of soliciting or selling products or services in direct
competition with the Company or any of its subsidiaries within the Restricted Territory;

                    (iv) Solicitation of Acquisition Candidates. Call upon any prospective acquisition candidate,
on Executive’s own behalf or on behalf of any person, which candidate was, to Executive’s knowledge
after due inquiry, either called upon by the Company,

3

 

or for which the Company made an acquisition analysis, for the purpose of acquiring such
candidate.

               (b) Certain Definitions. As used in this Agreement, the following terms shall have the
meanings ascribed to them:

                    (i) Competitive Business shall mean any person that engages in a business the same as, similar
to, or in direct competition with the Business;

                    (ii) person shall mean any individual, corporation, limited liability company, partnership,
firm, or other business of whatever nature;

                    (iii) Restricted Territory shall mean any jurisdiction in which the Company or any subsidiary
of the Company maintains any facilities, sells any products, or provides any services; and

                    (iv) subsidiary shall mean the Company’s consolidated subsidiaries, including corporations,
partnerships, limited liability companies, and any other business organization in which the Company
holds at least a fifty percent (50%) equity interest.

               (c) Enforcement. Because of the difficulty of measuring economic losses to the Company as a
result of a breach of the foregoing covenants in this paragraph 3, and because of the immediate and
irreparable damage that could be caused to the Company for which it would have no other adequate
remedy, Executive agrees that the foregoing covenants may be enforced by the Company in the event
of breach by Executive, by injunctions and restraining orders.

               (d) Reasonable Restraint. In agreeing to the period of non-competition as set forth herein,
Executive acknowledges that he has had the opportunity to speak with counsel of his choice in
connection with the force and effect of this waiver, and that he is aware that he is waiving rights
under California law to contest the imposition of a non-competition agreement. In agreeing to be
bound hereby, Executive is accepting the consideration extended to him in exchange for a knowing
waiver of his rights, and as full and complete consideration for this waiver, and acknowledges the
adequacy of such consideration. Both parties agree that Executive’s agreement to this term
constitutes a substantial and material term to the Company, without which the Company would not
enter into this Agreement or extend this offer of employment to Executive. Executive agrees that
the Company may seek and secure an injunction against Executive in order to enforce the terms
hereof in the event that Executive breaches this provision. Executive acknowledges that the scope
of the non-competition clause is reasonable in scope and will not preclude him from seeking gainful
employment in alternative fields. To the extent that any court of competent jurisdiction
determines that the non-competition provisions are unreasonable, it is the intent of the parties to
enforce the terms hereof to the full extent held reasonable.

               (e) Other Activities. It is further agreed by the parties that, in the event that Executive
shall cease to be employed hereunder and enters into a business or pursues other activities not in
competition with the Company (including the Company’s subsidiaries), or similar activities or
business in locations, the operation of which, under such circumstances, does

4

 

not violate this paragraph 3, and in any event such new business, activities, or location are
not in violation of this paragraph 3 or of Executive’s obligations under this paragraph 3, if any,
Executive shall not be chargeable with a violation of this paragraph 3 if the Company (including
the Company’s subsidiaries) shall thereafter enter the same, similar, or a competitive (i)
business, (ii) course of activities, or (iii) location, as applicable.

               (f) Separate Covenants. The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any other covenant.
Moreover, in the event any court of competent jurisdiction shall determine that the scope, time, or
territorial restrictions set forth are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent that the court deems reasonable, and the
Agreement shall thereby be reformed.

               (g) Independent Agreement. All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the existence of any claim or
cause of action of Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. It
is specifically agreed that the period following termination of employment stated at the beginning
of this paragraph 3, during which the agreements and covenants of Executive made in this paragraph
3 shall be effective, shall be computed by excluding from such computation any time during which
Executive is in violation of any provision of this paragraph 3.

          4. Term; Termination; Rights on Termination.

               (a) Term. The term of Executive’s employment under this Agreement (the “Term”) shall be from
the Effective Date until the date that is two years from the Effective Date.

               (b) Termination. Executive’s employment under this Agreement may be terminated in any one of
the followings ways:

                    (i) Death of Executive. The employment of Executive shall terminate immediately upon
Executive’s death provided that the Company shall, for a period of 12 months following such death,
pay to the estate of Executive an amount equal to Executive’s base salary and continue to pay all
premiums for coverage for Executive’s dependent family members under all health, hospitalization,
disability, dental, life, and other insurance plans that the Company maintained at the time of
Executive’s death.

                    (ii) Disability of Executive. If, as a result of incapacity due to physical or mental illness
or injury, Executive shall have been absent from Executive’s full-time duties hereunder for six
consecutive months, then 30 days after giving written notice to Executive (which notice may occur
before or after the end of such six month-period, but which shall not be effective earlier than the
last day of such six month-period), the Company may terminate Executive’s employment provided
Executive is unable to resume Executive’s full-time duties at the conclusion of such notice period.
Also, Executive may terminate Executive’s employment if Executive’s health should become impaired
to an extent that makes the continued

5

 

performance of Executive’s duties hereunder hazardous to Executive’s physical or mental health
or Executive’s life, provided that Executive shall have furnished the Company with a written
statement from a qualified doctor to such effect and provided, further, that, at the Company’s
request made within 10 days of the date of such written statement, Executive shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to Executive or
Executive’s doctor and such doctor shall have concurred in the conclusion of Executive’s doctor.
In the event Executive’s employment under this Agreement is terminated as a result of Executive’s
disability, Executive shall receive from the Company, in a lump-sum payment due within 10 days of
the effective date of such termination, an amount equal to the base salary payable to Executive
pursuant to paragraph 2(a) of this Agreement, for the lesser of the time period then remaining
under the Term or one year. The disability benefits provided for in this Agreement are independent
of any disability insurance benefits that Executive receives.

                    (iii) Termination by the Company for Good Cause. The Company may terminate Executive’s
employment upon 10 days prior written notice to Executive for “Good Cause,” which shall mean any
one or more of the following: (A) Executive’s willful dishonesty, fraud, or misconduct with respect
to the business or affairs of the Company, which materially and adversely affects the operations or
reputation of the Company; (B) Executive’s indictment for, conviction of, or guilty plea to a
felony crime involving dishonesty or moral turpitude whether or not relating to the Company; or (C)
a confirmed positive illegal drug test result. In the event of a termination by the Company for
Good Cause, Executive shall have no right to any severance compensation.

                    (iv) Termination by the Company Without Good Cause or by Executive with Good Reason. The
Company may terminate Executive’s employment without Good Cause during the Term hereof upon the
approval of a majority of the members of the Board, excluding Executive if Executive is a member of
the Board. Executive may terminate Executive’s employment under this Agreement for Good Reason
upon 10 days prior notice to the Company.

                         (A) Result of Termination by the Company without Good Cause or by Executive with Good Reason.
Should the Company terminate Executive’s employment without Good Cause or should Executive
terminate Executive’s employment with Good Reason during the Term, the Company shall pay to
Executive for two years after such termination, on such dates as would otherwise be paid by the
Company, a pro rata amount based on the base salary payable to Executive pursuant to paragraph 2(a)
of this Agreement. Further, if the Company terminates Executive’s employment without Good Cause or
Executive terminates Executive’s employment with Good Reason, (1) the Company shall continue the
insurance coverage as specified in paragraph 2(c)(i) or provide comparable coverage by way of
making the family medical insurance premium payments contemplated by COBRA or otherwise, in any
case for a period of two years after such termination; (2) the Company shall maintain life
insurance coverage, comparable to that provided immediately prior to termination, for a period of
two years thereafter with the beneficiary designated by Executive; and (3) Executive shall be
entitled to receive all other accrued but unpaid benefits relating to vacations and other executive
perquisites as provided in paragraph 2(c)(iv) through Executive’s last day of employment.

6

 

                         (B) Definition of Good Reason. Executive shall have “Good Reason” to terminate Executive’s
employment upon the occurrence of any of the following events without Executive’s prior written
approval: (1) Executive is demoted by means of a reduction in authority, responsibilities, or
duties as provided herein; (2) Executive’s annual base salary for a fiscal year as determined
pursuant to paragraph 2 is reduced to a level that is less than the base salary paid to Executive
during the prior fiscal year under this Agreement; (3) a change is made in Executive’s bonus
(including a reduction in any Targeted Bonus to a level that is less than the Targeted Bonus for
Executive during the prior fiscal year under this Agreement) other than as contemplated by
paragraph 2(b); (4) the Company breaches a material provision of this Agreement, including
paragraph 1(d); or (5) the Company fails to obtain the assumption of this Agreement by any
successor or assign of the Company or its principal business activities.

                    (v) Resignation by Executive Without Good Reason. Executive may, without cause, and without
Good Reason terminate Executive’s own employment under this Agreement, effective 30 days after
written notice is provided to the Company or such earlier time as any such resignation may be
accepted by the Company. If Executive resigns or otherwise terminates Executive’s employment
without Good Reason, Executive shall receive no severance compensation.

                    (vi) Change in Control of the Company.

                         (A) Possibility of Change in Control. Executive understands and acknowledges that the Company
may be merged or consolidated with or into another entity and that such entity shall automatically
succeed to the rights and obligations of the Company hereunder or that the Company may undergo
another type of Change in Control. In the event such a merger or consolidation or other Change in
Control is initiated prior to the end of the Term, then the provisions of this paragraph 4(b)(vi)
shall be applicable.

                         (B) Termination by Executive. Subject to the exceptions set forth in paragraph 4(b)(vi)(E),
if any Change of Control is initiated during Executive’s employment hereunder, Executive may, at
Executive’s sole discretion, elect to terminate Executive’s employment under this Agreement by
providing written notice to the Company at least five business days at any time prior to or within
12 months after the closing of the transaction giving rise to the Change in Control. In such case,
the applicable provisions of paragraph 4(b)(iv) hereof will apply as though the Company had
terminated Executive’s employment without Good Cause during the Term and all executive perquisites
shall continue for a period of 12 months; however, under such circumstances, the amount of the
severance payments due to Executive shall be paid in a lump sum and the non-competition provisions
of paragraph 3 hereof shall all apply for a period of 12 months from the effective date of
termination.

                         (C) Effective Date of Change in Control. For purposes of applying paragraph 4 hereof under
the circumstances described in 4(b)(vi)(B) above, the effective date of Change in Control will be
the closing date of the transaction giving rise to the Change in Control and all compensation,
reimbursements, and lump-sum payments due

7

 

Executive must be paid in full by the Company promptly following Executive’s election to
terminate Executive’s employment following such Change in Control.

                         (D) Definition of Change in Control. A “Change in Control” shall mean a change in control of
a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended, as in effect on
the date of this Agreement, or if Item 6(e) is no longer in effect, any regulations issued by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended,
which serve similar purposes; provided further that, without limitation, a Change in Control shall
be deemed to have occurred if and when:

                              (1) Turnover of Board. The following individuals no longer constitute a majority of the
members of the Board: (A) the individuals who, as of the date of this Agreement, constitute the
Board (the “Current Directors”); (B) the individuals who thereafter are elected to the Board and
whose election, or nomination for election, to the Board was approved by a vote of all of the
Current Directors then still in office (such directors becoming “Additional Directors” immediately
following their election); and (C) the individuals who are elected to the Board and whose election,
or nomination for election, to the Board was approved by a vote of all of the Current Directors and
Additional Directors then still in office (such directors also becoming “Additional Directors”
immediately following their election);

                              (2) Tender Offer. A tender offer or exchange offer is made whereby the effect of such offer
is to take over and control the Company, and such offer is consummated for the equity securities of
the Company representing 20% or more of the combined voting power of the Company’s then outstanding
voting securities;

                              (3) Merger or Consolidation. The stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if stockholder approval is
not obtained, other than any such transaction that would result in at least 75% of the total voting
power represented by the voting securities of the surviving entity outstanding immediately after
such transaction being beneficially owned by the holders of outstanding voting securities of the
Company immediately prior to the transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in the transaction; or

                              (4) Liquidation or Sale of Assets. The stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition by the Company of
all or a substantial portion of the Company’s assets to another person, which is not a wholly owned
subsidiary of the Company (i.e., 50% or more of the total assets of the Company); or

                              (5) Stockholdings. Any “person” (as that term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under that act), directly or indirectly of

8

 

more than 30% of the total voting power represented by the Company’s then outstanding voting
Securities.

                         (E) Exceptions from Change in Control. A Change in Control shall not be considered to have
taken place for purposes of this paragraph 4 in the event that both (1) the Change in Control shall
have been specifically approved by all of the Current and Additional Directors (as defined above)
and (2) the provisions of this Agreement remain in full force and effect as to Executive.

                         (F) Excess Parachute Payments. In the event that a Change in Control occurs and the aggregate
amount of any payments made to Executive hereunder, or pursuant to any plan, program, or policy of
the Company in connection with, on account of, or as a result of, such Change in Control
constitutes “excess parachute payments” as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”), subject to the excise tax imposed by Section 4999 of the Code, or
any successor sections thereof, Executive shall receive from the Company, in addition to any other
amounts payable under this Agreement, a lump sum payment equal to the amount of (i) such excise
tax, and (ii) the federal and state income taxes payable by the Executive with respect to any
payments made to Executive under this subparagraph (F). Such amount will be due and payable by the
Company or its successor within 10 days after Executive delivers a written request for
reimbursement accompanied by a copy of Executive’s tax return(s) showing the excise tax actually
incurred by Executive.

                         (G) Notification. Executive shall be notified in writing by the Company at any time that the
Company anticipates that a Change in Control may take place.

               (c) Payments to Termination Date. Upon termination of Executive’s employment under this
Agreement for any reason provided above, Executive shall be entitled to receive all compensation
earned and all benefits and reimbursements due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and payable to Executive
only to the extent and in the manner expressly provided above. All other rights and obligations of
the Company and Executive under this Agreement shall cease as of the effective date of termination,
except that the Company’s obligations under paragraph 8 (relating to indemnification of Executive)
and Executive’s obligations under paragraph 3 (relating to non-competition and non-solicitation, as
applicable), paragraph 5 (relating to return of Company property), paragraph 6 (relating to
inventions), paragraph 7 (relating to trade secrets), and paragraph 9 (relating to prior
agreements) shall survive such termination in accordance with their terms.

               (d) Failure to Pay Executive. If termination of Executive’s employment arises out of the
Company’s failure to pay Executive on a timely basis the amounts to which Executive is entitled
under this Agreement or as a result of any other breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 14, the
Company shall pay all amounts and damages to which Executive may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses and other costs
incurred by Executive to enforce Executive’s rights

9

 

hereunder. Further, none of the provisions of paragraph 3 (relating to non-competition) shall
apply in the event Executive’s employment under this Agreement is terminated as a result of a
breach by the Company.

               (e) Mitigation. The Company and Executive have mutually agreed that it would be appropriate
to mitigate the costs to the Company of any severance arrangements (other than relating to salary
or bonus) if Executive accepts other employment, the Company secures insurance or other coverage at
its cost, or Executive can obtain coverage under any governmental program without expense to
Executive, subject in each case to providing comparable benefits to Executive with no out-of-pocket
cost to him. As a result, all medical, disability, and other similar benefits payable to Executive
following the termination of Executive’s employment under this Agreement shall be reduced on a
dollar-for-dollar basis by (i) any medical, disability, and other similar benefits received by or
which may reasonably be receivable by Executive from any subsequent employer, (ii) any governmental
benefits available to Executive upon premium payments made or reimbursed by the Company to or on
behalf of Executive, or (iii) any insurance, annuity, or comparable payments or coverage furnished
by the Company at no cost to Executive as an alternative to the benefits provided by this
Agreement.

          5. Return of Company Property. All records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, and other property delivered to or compiled by Executive by
or on behalf of the Company (or its subsidiaries) or its representatives, vendors, or customers
that pertain to the business of the Company (or its subsidiaries) shall be and remain the property
of the Company and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials, and other similar data pertaining
to the business, activities, or future plans of the Company (or its subsidiaries) that is collected
by Executive shall be delivered promptly to the Company without request by it upon termination of
Executive’s employment.

          6. Inventions. Executive shall disclose promptly to the Company any and all significant
conceptions and ideas for inventions, improvements, and valuable discoveries, whether patentable or
not, which are conceived or made by Executive, solely or jointly with another, during the period of
employment, and which are directly related to the business or activities of the Company (or its
subsidiaries), and which Executive conceives as a result of Executive’s employment by the Company.
Executive hereby assigns and agrees to assign all Executive’s interests therein to the Company or
its nominee. Whenever requested to do so by the Company, Executive shall execute any and all
applications, assignments, and other instruments that the Company shall deem necessary to apply for
and obtain Letters Patent of the United States or any foreign country or to otherwise protect the
Company’s interest therein.

          7. Trade Secrets. Executive agrees that Executive will not, during or after the period of
employment under this Agreement, disclose the specific terms of the Company’s relationships or
agreements with its respective significant vendors or customers, or any other significant and
material trade secret of the Company, whether in existence or proposed, to any person, firm,
partnership, corporation, or business for any reason or purpose whatsoever.

          8. Indemnification. In the event Executive is made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,

10

 

administrative, or investigative (other than an action by the Company against Executive), by
reason of the fact that Executive is or was performing services under this Agreement, then the
Company shall indemnify Executive against all expenses (including attorneys’ fees), judgments,
fines, and amounts paid in settlement, as actually and reasonably incurred by Executive in
connection therewith to the maximum extent permitted by applicable law. The advancement of
expenses shall be mandatory. In the event that both Executive and the Company are made a party to
the same third-party action, complaint, suit, or proceeding, the Company agrees to engage competent
legal representation, and Executive agrees to use the same representation, provided that if counsel
selected by the Company shall have a conflict of interest that prevents such counsel from
representing Executive, Executive may engage separate counsel and the Company shall pay all
attorneys’ fees of such separate counsel. Further, while Executive is expected at all times to use
Executive’s best efforts to faithfully discharge Executive’s duties under this Agreement, Executive
cannot be held liable to the Company for errors or omissions made in good faith if Executive has
not exhibited gross, willful, and wanton negligence and misconduct or performed criminal and
fraudulent acts that materially damage the business of the Company. Notwithstanding this paragraph
8, the provision of any written indemnification agreement applicable to the directors and officers
of the Company to which Executive shall be a party shall apply rather than this paragraph 8 to the
extent inconsistent with this paragraph 8.

          9. No Prior Agreements. Executive hereby represents and warrants to the Company that the
execution of this Agreement by Executive and Executive’s employment by the Company and the
performance of Executive’s duties hereunder will not violate or be a breach of any agreement with a
former employer, client, or any other person or entity. Further, Executive agrees to indemnify the
Company for any claim, including, but not limited to, attorneys’ fees and expenses of
investigation, by any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition, invention, or secrecy
agreement between Executive and such third party that was in existence as of the date of this
Agreement.

          10. Assignment; Binding Effect. Executive understands that Executive is being employed by the
Company on the basis of Executive’s personal qualifications, experience, and skills. Executive
agrees, therefore, Executive cannot assign all or any portion of Executive’s performance under this
Agreement. Subject to the preceding two (2) sentences and the express provisions of paragraph 11
below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the
parties hereto and their respective heirs, legal representatives, successors, and assigns.

          11. Complete Agreement. This Agreement is not a promise of future employment. Except as
specifically provided herein, Executive has no oral representations, understandings, or agreements
with the Company or any of its officers, directors, or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete, and exclusive statement
and expression of the agreement between the Company and Executive and of all the terms of this
Agreement, and it cannot be varied, contradicted, or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company and Executive, and
no term of this Agreement may be waived except by writing signed by the party waiving the benefit
of such

11

 

term. This Agreement hereby supersedes any other employment agreements or understandings,
written or oral, between the Company and Executive.

          12. Notice. Whenever any notice is required hereunder, it shall be given in writing addressed
as follows:

	 	 	 	 	 
	 

	 	To the Company:
	 	20480 E. Business Parkway
	 

	 	 	 	City of Industry, California 91789
	 

	 	 	 	Attention: Corporate Secretary
	 
	 	 	 	 
	 

	 	To Executive:
	 	To the residence address of Executive
	 

	 	 	 	as shown in the records of the Company

          Notice shall be deemed given and effective on the earlier of three (3) days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail, certified, return
receipt requested, or when actually received. Either party may change the address for notice by
notifying the other party of such change in accordance with this paragraph 12.

          13. Severability; Headings. If any portion of this Agreement is held invalid or inoperative,
the other portions of this Agreement shall be deemed valid and operative and, so far as is
reasonable and possible, effect shall be given to the intent manifested by the portion held invalid
or inoperative. The paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any
part hereof.

          14. No Participation in Severance Plans. Except as contemplated by this Agreement, Executive
acknowledges and agrees that the compensation and other benefits set forth in this Agreement are
and shall be in lieu of any compensation or other benefits that may otherwise be payable to or on
behalf of Executive pursuant to the terms of any severance pay arrangement of the Company or any
affiliate thereof, or any other similar arrangement of the Company or any affiliates thereof
providing for benefits upon involuntary termination of employment.

          15. Governing Law. This Agreement shall in all respects be construed according to the laws of
the state of California, notwithstanding the conflict of laws provisions of such state.

          16. Counterparts; Facsimile Signatures. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall constitute the same
agreement. This Agreement may be executed by facsimile, PDF, or other electronic means.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.

	 	 	 	 	 	 	 
	 	 	SYNTAX-BRILLIAN CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 /s/ John S. Hodgson	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 John S. Hodgson	 	 
	 

	 	 	 	 	 	 
	 

	 	Its:	 	 Executive Vice President and
Chief Financial Officer	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 /s/ James Li	 	 
	 	 	 	 	 
	 	 	              James Li	 	 

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