Document:

Ex-10.12

 

Exhibit 10.12

AMENDMENT NO. 4

TO

THE HAMILTON BEACH/PROCTOR-SILEX, INC.

UNFUNDED BENEFIT PLAN

(As Amended and Restated Effective as of October 1, 2001)

WITH RESPECT TO

THE AMERICAN JOBS CREATION ACT OF 2004

     WHEREAS, Hamilton Beach/Proctor-Silex, Inc. (the “Company”) adopted an
amended and restated Unfunded Benefit Plan (the “Plan”) effective as of October
1, 2001 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 5.1 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
Benefits that were deferred prior to January 1, 2005.

     NOW THEREFORE, the Company hereby adopts this Amendment No. 4 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 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. 4) 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. 4 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. 4 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
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. 4. In particular, to the extent permitted
under AJCA Guidance:

     (i) On and after January 1, 2005, the LTIP Deferral Sub-Account shall only
accept the deferral of LTIP Awards (A) that are 100% vested as of December 31,
2004, (B) with Grant Dates of January 1, 2004 and (C) that are validly and
timely deferred under the LTIP Plan and, as such, the LTIP Deferral Sub-Account
shall be a Grandfathered Sub-Account; and

     (ii) No additional amounts shall be allocated to a Participant’s Excess
Matching Sub-Account for periods on or after January 1, 2005, and, as such, the
Excess Matching Sub-Account shall be a Grandfathered Sub-Account; and

     (iii) Amounts allocated to a Participant’s Excess 401(k) Sub-Account as of
December 31, 2004 shall be credited to the Participant’s Grandfathered
Sub-Account; and

     (iv) 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
the Participants’ Accounts in 2005), shall be credited to Participant’s
Grandfathered Sub-Account; and

     (v) All Excess Pension Benefits were permanently frozen as of January 1,
1997 and, as such, all such Benefits are grandfathered under the Act.”

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Section 2

     Section 2.1 of the Plan is hereby amended in its entirety to read as
follows:

     “SECTION 2.1 Account shall mean the record maintained by the Company in
accordance with Section 3.6 as the sum of the Participant’s Excess Profit
Sharing Sub-Account, Excess Employer Added Sub-Account, Basic Excess 401(k)
Sub-Account, Basic Excess Matching Sub-Account, Additional Excess 401(k)
Sub-Account, Additional Excess Matching Sub-Account and LTIP Deferral
Sub-Account. 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 and (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. The Pre-2005 Excess Profit Sharing Sub-Account, the Pre-2005
Excess 401(k) Sub-Account, the Excess Matching Sub-Account and the LTIP
Deferral 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 2.7 of the Plan is hereby amended by changing the reference to
“Sections 3.2 and 3.3” therein to “Sections 3.2, 3.3 and 3.8.”

Section 4

     Section 2.8 of the Plan is hereby amended by adding the phrase “an Excess
Employer Added Benefit,” after the phrase “an Excess Profit Sharing Benefit,”
therein.

Section 5

     Section 2.10 of the Plan is hereby amended in its entirety to read as
follows:

     “SECTION 2.10 401(k) Employee shall mean a participant in the Savings
Plan who is eligible for Before-Tax (and, for periods prior to January 1, 2005,
Matching Employer Contributions) thereunder.”

Section 6

     Clause (i) of Section 2.13(c) of the Plan is hereby amended in its
entirety to read as follows:

     “(i) who is unable to make all of the Before-Tax Contributions that he has
elected to make to the Savings Plan, because of the limitations imposed under
Section 402(g), 401(a)(17), 401(k)(3) or 414(v) of the Code and”

Section 7

     Section 2.13 of the Plan is hereby amended by adding a new subsection (g)
to the end thereof, to read as follows:

     “(g) For purposes of Section 3.8 of the Plan, the term “Participant” shall
mean an Employer Added Employee (i) whose Retirement Contributions for a Plan
Year are limited by the application of Section 401(a)(17) or 415 of the Code
and (ii) who is classified in job grades 17 or above and whose total
compensation from the Controlled Group for the year of such Contribution is at
least $115,000.”

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Section 8

     The first sentence of Section 2.18 of the Plan is hereby amended in its
entirety to read as follows:

“Qualified Plan shall mean (a) for Cash Balance Employees, the Cash
Balance Plan, (b) for Profit Sharing Employees and Employer Added
Employees, the profit-sharing portion of the Savings Plan and (c) for
401(k) Employees, the Before-Tax Contributions portion of the Savings
Plan.”

Section 9

     Section 2.20 of the Plan is hereby amended in its entirety to read as
follows:

     “SECTION 2.20 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 10

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

     “SECTION 2.22 Employer Added Employee shall mean a participant in the
Savings Plan who is eligible for Retirement Contributions.

     SECTION 2.23 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 (or a related entity) as long as any stock of which is publicly traded
on an established securities market or otherwise.

     SECTION 2.24 Termination of Employment means a separation of service as
defined in the AJCA Guidance issued under Code Section 409A.”

Section 11

     Section 3.1 of the Plan is hereby amended by adding the following new
language to the end thereof to read as follows:

“All Excess Pension Benefits under the Plan were frozen as of January 1,
1997. The Company intends that all Excess Pension Benefits will qualify
for “grandfathered” status under the AJCA and will continue to be governed
by the law applicable to nonqualified deferred compensation prior to the
addition of Section 409A of the Code.”

Section 12

     Section 3.3(a) of the Plan is hereby amended by deleting the phrase
“401(a)(17) and 401(k)(3)” and replacing it with the phrase “401(a)(17),
401(k)(3) and 414(v)” therein.

Section 13

     Section 3.3(c)(i) of the Plan is hereby amended by adding the following
new language to the end thereof to read as follows:

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“Notwithstanding the foregoing, a Participant shall be permitted to make a
separate election with respect to amounts credited to his Post-2004 Excess
401(k) Sub-Account. With respect to amounts allocated to that
Sub-Account, (1) the Participant may only elect to receive a distribution
(W) on the date on which he incurs a Termination of Employment, (X) the
January 1st of the year following the date on which he incurs a
Termination of Employment, (Y) the date he attains a specified age or (Z)
the earlier of such dates 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
Termination of Employment (or, if earlier, the date of death), to the
extent that Code Section 409A(a)(2)(B)(i) is applicable.”

Section 14

     Section 3.3(c)(ii) of the Plan is hereby amended by adding the following
new sentence to the end thereof to read as follows:

“Notwithstanding the foregoing, for purposes of the Participant’s
Post-2004 Excess 401(k) Sub-Account, an election change will not be
effective unless (X) it is made not less than twelve months prior to the
original payment date, (Y) the first payment under such election will be
made no less than five years from the original payment date and (Z) such
election will not take effect until at least twelve months after the date
on which such election is made.”

Section 15

     Section 3.3(d) of the Plan is hereby amended by adding the following new
sentence to the end thereof, to read as follows:

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

Section 16

     Section 3.3(e) of the Plan is hereby amended by adding the following new
clause (iv) to the end thereof, to read as follows:

     “(iv) The provisions of this Subsection (e) shall apply only to the extent
permitted under Code Section 409A.”

Section 17

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

“Notwithstanding the foregoing, no additional Excess Matching Benefits
deferrals shall be credited under the Plan for periods on and after
January 1, 2005.”

Section 18

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

     “(b) Time of Payment. The Excess Matching Benefits shall be paid (or
commence to be paid) at the same time as the Participant’s Pre-2005 Excess
401(k) Sub-Account.”

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Section 19

     Section 3.5(a) of the Plan is hereby amended by adding the following
sentence to the end thereof, to read as follows:

“Notwithstanding the foregoing, the only LTIP Deferral Benefits that shall
be accepted hereunder are those with a Grant Date of January 1, 2004 that
are deemed to have been “deferred” (as such term is defined in the AJCA
Guidance) as of December 31, 2004 and that qualify for grandfathered
status under the Act.”

Section 20

     Section 3.5(f) of the Plan is hereby amended by adding the following new
clause (iii) to the end thereof, to read as follows:

     “(iii) The provisions of this Subsection (f) shall apply only to the
extent permitted under Code Section 409A.”

Section 21

     Section 3.6 of the Plan is hereby amended by (i) deleting the word “and”
at the end of Subsection (e) thereof, (ii) changing the period at the end of
Subsection (f) to a semi-colon and (iii) adding the following new Subsections
(g) and (h) immediately after Subsection (f) thereof to read as follows:

     “(g) Credits to an Excess Employer Added Sub-Account for the Excess
Employer Added Benefits described in Section 3.8, which shall be credited to
the Sub-Account when an Employer Added Employee is prevented from receiving
Retirement Contributions under the Savings Plan; and

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

Section 22

     Article III of the Plan is hereby amended by adding the following new
Section 3.8 to the end thereof to read as follows:

     “SECTION 3.8 Employer Added Benefits.

     (a) Amount of Employer Added Benefits. At the time described in Section
3.6(g), the Company shall credit to a Sub-Account (the “Excess Employer Added
Sub-Account”) established for each Participant who is an Employer Added
Employee, an amount equal to the excess, if any, of (a) the amount of the
Company’s Retirement Contributions which would have been made to the profit
sharing portion of the Savings Plan on behalf of the Participant if (i) such
Plan did not contain the limitations imposed under Sections 401(a)(17) and 415
of the Code and (ii) the term “Compensation” (as defined in Section 2.7 hereof)
were used for purposes of determining the amount of Retirement Contributions
under the Savings Plan, over (b) the amount of the Company’s Retirement
Contribution which is actually made to the Savings Plan on behalf of the
Participant for such Plan Year (the “Excess Employer Added Benefits”).

     (b) Rules Relating to Excess Employer Added Benefit Payment Date Elections

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(i) Payment Date. Prior to the date on which the first Excess Employer
Added Contribution is credited to a Participant’s Excess Employer Added
Sub-Account (with the timing of such election complying with the
requirements of Code Section 409A), a Participant shall be required to
make an election regarding the time of the commencement of payment of the
Participant’s entire Excess Employer Added Sub-Account hereunder. The
Participant may elect to commence payment of his Excess Employer Added
Sub-Account on (1) the date on which he incurs a Termination of
Employment, (2) the January 1st of the year following the date on which he
incurs a Termination of Employment, (3) the date he attains a specified
age or (4) the earlier of such dates; provided, however, that 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 Termination of Employment (or, if earlier, the date of
death), to the extent that Code Section 409A(a)(2)(B)(i) is applicable. A
Participant who does not timely and properly file such an election form
shall be deemed to have elected to receive his Excess Employer Added
Sub-Account on the date of his Termination of Employment.

(ii) Change of Payment Date. Notwithstanding the foregoing, a Participant
who is an Employee may elect to change the payment date selected (or
deemed selected) for his Excess Employer Added Sub-Account to one of the
other dates permitted under (i) above; provided, however that such an
election change will not be effective unless (1) it is made not less than
twelve months prior to the original payment date, (2) the first payment
under such election will be made no less than five years from the original
payment date and (3) such election will not take effect until at least
twelve months after the date on which such election is made.”

Section 23

     The first sentence of Section 4.2 of the Plan is hereby amended in its
entirety to read as follows:

     “Earnings on Additional 401(k), Matching and Employer Added Sub-Accounts.
Subject to Section 4.3, at the end of each calendar month during a Plan Year,
the Additional Excess 401(k) Sub-Account, the Additional Excess Matching
Sub-Account and the Employer Added Sub-Account of each Participant shall be
credited with an amount determined by multiplying such Participant’s average
Sub-Account balance during such month by the blended rate earning during such
month by the Fixed Income Fund.”

Section 24

     Section 4.4(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. Benefit Committee
(the “Benefits Committee”)) may change (but not suspend) the earnings rate
credited to Accounts hereunder at any time upon at least 30 days advance
notice to Participants.”

Section 25

     Section 6.1(b) of the Plan is hereby amended in its entirety to read as
follows:

     “(b) Excess Profit Sharing Benefits. Amounts credited to a Participant’s
Pre-2005 Excess Profit Sharing Sub-Account shall be paid in the form of a
single lump sum payment at the time the corresponding Post-1996 Profit Sharing
Contributions payable to the Participant under the Savings Plan commence to be
paid. Amounts credited to a Participant’s Post-2004 Excess Profit Sharing
Sub-Account shall be paid in the form of a single lump sum payment at
Termination of Employment, provided, however, that with respect to a Key
Employee, distribution may not be made before the date which is six months
after the date of the Key

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

Section 26

     The heading of Section 6.1(c) of the Plan and Section 6.1(c)(i) of the
Plan is hereby amended in its entirety to read as follows:

     “(c) Excess 401(k) and Matching Benefits/LTIP Deferral Benefits/Excess
Employer Added Benefits.

     (i) Timing. A Participant’s Excess 401(k) Sub-Account, Excess Matching
Sub-Account, LTIP Deferral Sub-Account and Excess Employer Added Sub-Account
shall be paid (or commence to be paid) to the Participant as soon as
practicable after the date specified in the Participant’s last valid election
form (as provided in Section 3.3(c), 3.5(c), or 3.8(b) as applicable).”

Section 27

     Section 6.1(c) of the Plan is hereby amended by adding the following new
clause (iv), immediately following clause (iii) thereof and re-numbering the
remaining clause of such Section as clause (v):

     “(iv) Clauses (ii) and (iii) above shall not apply to a Participant’s
Post-2004 Excess 401(k) Sub-Account or Excess Employer Added Sub-Account. The
Participant shall elect a form of payment for each of his Post-2004 Excess
401(k) Sub-Account and Excess Employer Added Sub-Account prior to December 31,
2004 (or when the Plan first becomes applicable to him, if later). He may
elect to receive each such Sub-Account 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
Excess Employer Added 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 his Excess Employer Added 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 28

     The second sentence of Section 6.1(c)(v) 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).”

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Section 29

     Section 6.1(d)(i) of the Plan is hereby amended in its entirety to read as
follows:

     “(i) The provisions of this Subsection shall apply notwithstanding any
other provision of the Plan to the contrary but shall only apply to amounts
that are allocated to a Participant’s Grandfathered Sub-Accounts.”

Section 30

     The last sentence of Section 6.1(e) of the Plan is hereby amended in its
entirety to read as follows:

“The Compensation Committee of the Board of Directors of the Company (the
“Compensation Committee”), 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 31

     Section 7.3(a) of the Plan is hereby amended by adding the following new
clause (v) to the end thereof to read as follows:

     “(v) Amount of Excess Employer Added Benefit. The Excess Employer Added
Benefits payable to a Participant’s Beneficiary under this Plan shall be equal
to such Participant’s Excess Employer Added Sub-Account balance on the date of
the distribution.”

Section 32

     Section 7.3(b)(ii) of the Plan is hereby amended in its entirety to read
as follows:

     “(ii) Excess Profit Sharing Benefit/Excess 401(k) Benefit and Excess
Matching Benefit/LTIP Deferral Benefit/Excess Employer Added Benefit. The
Excess Profit Sharing Benefit, Excess 401(k) Benefit and Excess Matching
Benefit, LTIP Deferral Benefit and Excess Employer Added Benefit payable to a
Beneficiary under this Plan shall be paid as soon as practicable following the
death of the Participant in the form of a lump sum payment.”

Section 33

     Section 7.3 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 34

     Section 9.3 of the Plan is hereby amended by (i) deleting the word “may”
where it appears in the second sentence of the first paragraph thereof and
substituting therefor the word “must” and (ii) deleting the last sentence of
the first and fourth paragraphs thereof.

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Section 35

     The first sentence of Section 9.5 of the Plan is hereby amended by
deleting the word “Committee” where it appears therein and substituting
therefor the phrase “Company (with the approval or ratification of the Benefits
Committee).”

Section 36

     The second sentence of Section 9.6(a) of the Plan is hereby amended by
deleting the phrase “the Nominating, Organization and Compensation Committee of
the Board of Directors of the Company” where it appears therein and
substituting therefor the phrase “the Compensation Committee.”

Section 37

     A new Section 9.7 is hereby added to the end of the Plan, to read as
follows:

     “SECTION 9.7. 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 VIII and IX shall apply only to the
extent permitted by Code Section 409A.”

     Executed this 28th day of December, 2004.

	 	 	 	 	 
	 	 	HAMILTON BEACH/PROCTOR-SILEX, INC.
	 
	 	 	 	 
	

	 	By:	 	 /s/ Charles A. Bittenbender
	

	 	 	 	

	 	 	Title: Assistant Secretary

-10-Ex-10.13

 

Exhibit 10.13

AMENDMENT NO. 1

TO

THE KITCHEN COLLECTION, INC.

LONG TERM INCENTIVE COMPENSATION PLAN

(Effective as of January 1, 2003)

WITH RESPECT TO

THE AMERICAN JOBS CREATION ACT OF 2004

     WHEREAS, The Kitchen Collection, Inc. (the “Company”) adopted The Kitchen
Collection, Inc. Long-Term Incentive Compensation Plan (the “Plan”) effective
as of January 1, 2003; 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(a) of the Plan, all Awards under the Plan
are 100% vested as of the Grant Date (meaning that Awards with Grant Dates of
January 1, 2004 are 100% vested as of December 31, 2004); 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 Awards
that are deferred prior to January 1, 2005; and

     NOW THEREFORE, the Company hereby adopts this Amendment No. 1 to the Plan,
which amendment is intended to (1) allow amounts deferred prior to January 1,
2005 to qualify for “grandfathered” status and to continue to be governed by
the law applicable to nonqualified deferred compensation prior to the addition
of Code Section 409A (as specified in the Plan as in effect before the adoption
of this Amendment No. 4) 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 the following new
Section 1A to the end thereof, to read as follows:

     “1A. American Jobs Creation Act (AJCA).

     (a) It is intended that the Plan (including any Amendments thereto) comply
with the provisions of Section 409A of the Internal Revenue Code (the “Code”),
as enacted by the AJCA, so as to prevent the inclusion in gross income of any
Awards hereunder in a taxable year that is prior to the taxable year or years
in which such Awards would otherwise be actually paid or made available to the
Participant. The Plan shall

 

 

be administered in a manner that will comply with Section 409A of the Code,
including 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 provision
that would cause the Plan to fail to satisfy Section 409A of the Code
(including any provision added by this Amendment) 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 Committee shall not take any action hereunder that would violate
any provision of Section 409A of the Code. It is intended that all
Participants’ elections hereunder will comply with Code Section 409A and the
AJCA Guidance. The Committee 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 Committee is authorized to permit
Participant elections with respect to amounts deferred after December 31, 2004
and is also permitted to give the Participants the right to amend or revoke
such elections in accordance with the AJCA Guidance.

     (c) The effective date of Amendment No. 1 to this Plan is January 1, 2005.
Amendment No. 1 creates two sets of Awards hereunder — (a) the “Pre-2005
Awards” for Awards that are “deferred” (as such terms is defined in the AJCA
Guidance) as of December 31, 2004 and (b) the “Post-2004 Awards” for amounts
that are deferred after December 31, 2004. Amendment No. 1 also modifies the
distribution elections and provisions for the Post-2004 Awards to comply with
the requirements of Code Section 409A.

     (d) In furtherance of, but without limiting the foregoing, the Awards that
are deemed to have been deferred prior to January 1, 2005 and that qualify 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. 1 thereto. In particular (a) the Awards with Grant Dates of
January 1, 2004 shall be designated as Pre-2005 Awards and (b) to the extent
permitted by AJCA Guidance, the Awards with a Grant Date of January 1, 2005
shall also be designated as Pre-2005 Awards.”

Section 2

     Section 2(a) of the Plan is hereby amended by adding the following
sentence to the end thereof, to read as follows:

     “The Participant’s Awards shall be further divided into the following two
sub-sets (i) the “Pre-2005 Awards” for amounts that are “deferred” (as such
term is defined in the AJCA Guidance) as of December 31, 2004 and (ii) the
“Post-2004 Awards” for amounts that are deferred after December 31, 2004 (and
earnings thereon).”

Section 3

     Section 2 of the Plan is hereby amended by adding the following new
definitions to the end thereof, to read as follows:

     “(q) “Disability” or “Disabled.” A Participant shall be deemed to have a
“Disability” or be “Disabled” if the Participant (1) 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 (2)
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.

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     (r) “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 so
long as the Company (or a related entity) is a corporation, any stock in which
is publicly traded on an established securities market or otherwise.

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

     (t) “Unforeseeable Emergency” shall mean an event which results in a
severe financial hardship to the Participant as a consequence of (i) an illness
or accident of the Participant, the Participant’s spouse or a dependent within
the meaning of Code Section 152, (ii) loss of the Participant’s property due to
casualty or (iii) other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant.”

Section 4

     The second sentence of Section 3 of the Plan is hereby amended by adding
the following new clause to the end thereof, to read as follows:

     “;provided, however, that the Committee shall not have any authority to
interpret any provision of the Plan or to adopt or amend any rules or
regulations (or amend the Guidelines) in any manner that would cause the Plan
to fail to meet the requirements of Code Section 409A).”

Section 5

     Section 6 of the Plan is hereby amended (1) by renaming the Section as
“Vesting and Payment of Pre-2005 Awards” and (2) adding the following new
Subsection (e) to the end thereof, to read as follows:

     “(e) The provisions of this Section shall apply only to the Participants’
Pre-2005 Awards. In addition, the Committee shall not exercise any discretion
with respect to the Pre-2005 Awards that would result in a “material amendment”
to the Plan that would jeopardize the “grandfathered” status of the Pre-2005
Awards under Code Section 409A.”

Section 6

     The Plan is hereby amended by adding the following new Section 6A thereto,
immediately following Section 6, to read as follows:

     6A. Vesting and Payment of Post-2004 Awards.

     (a) Vesting. All Book Value Units granted pursuant to a Post-2004 Award
hereunder shall be immediately 100% vested as of the Grant Date.

     (b) Maturity Date.

     (i) In the Guidelines adopted for each Award Year, the Committee shall
establish a maturity date for the Book Value Units granted in each Post-2004
Award for such Award Year which shall generally be the fifth anniversary of the
Grant Date of such Award (or such other date specified in the Guidelines) (the
“Maturity Date”); provided, however, that once established, the Maturity Date
of an Award as specified in the Guidelines may not thereafter be changed.

     (ii) Notwithstanding the foregoing, in the event of a Participant’s
Termination of Employment caused by death, Disability or Retirement, the
Maturity Date of all of the Participant’s outstanding Post-2004

3

 

Awards shall be the date of such Participant’s Termination of Employment;
provided, however, that if the Participant is a Key Employee, the Participant’s
Maturity Date shall be the six month anniversary of the date of his Termination
of Employment (or, if earlier, the date of the Participant’s death).

     (c) Payment Date, Form of Payment and Value.

     (i) Payment Date and Form. Unless a Participant timely makes a deferral
election under Subsection (d) hereof, the Company shall deliver to the
Participant (or, if applicable, his Beneficiary), a check in full payment of
the Book Value Units granted pursuant to each Post-2004 Award as soon as
practicable following the Maturity Date of such Award.

     (ii) Value. For Participants who are employed on the Maturity Date, the
value of the Book Value Units shall be based on the Book Value as of the
Quarter Date immediately preceding the Maturity Date. For Participants who
incur a Termination of Employment for reasons other than death, Disability or
Retirement, the value of the Book Value Units shall be based on the Book Value
as of the Quarter Date coincident with or immediately preceding the date of
Termination (despite the fact that such amounts are not paid until the Maturity
Date). For Participants who terminate employment due to death, Disability or
Retirement, the value of such Book Value Units shall be based on the Book Value
as of the Quarter Date coincident with or immediately preceding the Maturity
Date; provided, however, that if a Participant is a Key Employee whose payment
is delayed for 6 months, the value of the Book Value Units shall be based on
the Book Value as of the Quarter Date coincident with or immediately preceding
the payment date.

     (d) Deferral Option. No deferral options are currently available with
respect to Post-2004 Awards under the Plan. However, the Company intends to
give Participants the right to defer payment of their Post-2004 Awards, in
accordance with the AJCA Guidance issued under Code Section 409A. The Company,
in its sole and absolute discretion shall have the right to determine what
deferral options will be available and shall amend the Plan to reflect those
options, subject to the requirements of Code Section 409A.”

Section 7

     The Plan is hereby amended by adding the following new Section 6B thereto,
immediately following Section 6A, to read as follows:

     “6B. Unforeseeable Emergency Distribution for Post-2004 Awards.
Notwithstanding any provision of the Plan to the contrary, the Committee may at
any time, upon written request of the Participant, cause to be paid to such
Participant an amount equal to all or any part of the Participant’s vested
Post-2004 Awards, if the Committee determines, based on such reasonable
evidence that it shall require, that such a payment or payments is necessary
for the purpose of alleviating the consequences of an Unforeseeable Emergency
occurring with respect to the Participant. 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).”

4

 

Section 8

     Section 8 of the Plan is hereby amended by adding the following new
Subsection (e) to the end thereof, to read as follows:

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

Section 9

     Subsection 9(d) of the Plan is hereby amended by adding the following new
clause (iii) to the end thereof, to read as follows:

     “(iii) The provisions of this Subsection shall apply only to the extent
permitted by Code Section 409A.”

     Executed this 28th day of December, 2004.

	 	 	 	 	 
	 	 	THE KITCHEN COLLECTION, INC.
	 
	 	 	 	 
	

	 	By:	 	 /s/ Charles A. Bittenbender
	

	 	 	 	

	 	 	Title: Assistant Secretary

5

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