FORM OF
AMENDED AND RESTATED
KAYDON CORPORATION
CHANGE IN CONTROL COMPENSATION AGREEMENT
AGREEMENT made and executed October 23,
2008 between KAYDON CORPORATION, a Delaware corporation, 315 East
Eisenhower Parkway, Suite 300, Ann Arbor ,
Michigan 48108 (Kaydon), and _____ (the
Executive). This Agreement was initially entered into and effective
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The Board of Directors of Kaydon has recommended
and approved that Kaydon enter into agreements providing for
compensation under certain circumstances involving a change in
control of Kaydon. Executive is a key executive of Kaydon or one or
more of its Subsidiaries and has been selected by the
Compensation Committee of the Board of Directors to enter into this
Agreement.
The Board of Directors believes it is imperative
that Kaydon and the Board be able to rely upon Executive to
continue in his position should Kaydon become subject to a proposed
or threatened Change in Control. The Board also believes it is
critical that Kaydon and the Board be able to receive and rely upon
Executive’s advice, if requested, as to the best interests of
Kaydon and its stockholders, without concern that Executive might
be distracted by the personal uncertainties and risks created by
such a proposal or threat. The parties anticipate that this may
require actions above and beyond Executive’s regular duties
as the Board determines to be appropriate.
To assure Kaydon that it will have the continued
dedication of Executive and the availability of Executive’s
advice and counsel notwithstanding the possibility, threat or
occurrence of an effort to take over control of Kaydon, and to
induce Executive to remain in the employ of Kaydon and its
Subsidiaries and for other good and valuable consideration,
Kaydon and Executive agree as follows:
1. Services During Certain Events .
In the event a third person begins a tender or exchange offer,
circulates a proxy to stockholders, or takes other steps to effect
a Change in Control, Executive agrees that he will not voluntarily
terminate employment with Kaydon (or the Subsidiary then employing
Executive) on less than three months written notice to the Board of
Directors or the Chief Executive Officer of Kaydon, will render the
services expected of his position, and will act in all things
related to the interests of the stockholders of Kaydon until the
third person has abandoned or terminated the efforts to effect a
Change in Control or until a Change in Control has
occurred.
2. Termination In Connection With or
Following Change in Control . In the event that Executive
incurs a Separation from Service (as defined below) under the
circumstances stated in Subsection (a) during the period
beginning on the date a third person begins a tender or exchange
offer, circulates a proxy to stockholders, or takes other steps to
effect a Change in Control and ending on the earlier of the
complete abandonment of that effort, the date which is three years
following the date a Change in Control is deemed to have occurred
or the date this Agreement ceases to apply to Executive (the
Protected Period), Kaydon will provide to Executive the rights and
benefits described in Subsection (b), except as provided in
Subsection (c).
For purposes of this Agreement,
“Separation from Service” or “Separates from
Service” shall mean Executive’s termination of
employment, as determined in accordance with Treas. Reg.
§1.409A-1(h). Executive shall be considered to have
experienced a termination of employment when the facts and
circumstances indicate that Executive and Kaydon reasonably
anticipate that either (i) no further services will be
performed for Kaydon after a certain date, or (ii) that the
level of bona fide services Executive will perform for Kaydon after
such date (whether as an employee or as an independent contractor)
will permanently decrease to no more than 20% of the average level
of bona fide services performed by Executive (whether as an
employee or independent contractor) over the immediately preceding
36-month period (or the full period of services to Kaydon if
Executive has been providing services to Kaydon for less than
36 months). If Executive is on military leave, sick leave, or
other bona fide leave of absence, the employment relationship
between Executive and Kaydon shall be treated as continuing intact,
provided that the period of such leave does not exceed six months,
or if longer, so long as Executive retains a right to reemployment
with Kaydon under an applicable statute or by contract. If the
period of a military leave, sick leave or other bona fide leave of
absence exceeds six months and Executive does not retain a right to
reemployment under an applicable statute or by contract, the
employment relationship shall be considered terminated for purposes
of this Agreement as of the first date immediately following the
end of such six-month period. In applying the provisions of this
paragraph, the leave of absence shall be considered a bona fide
leave of absence only if there is a reasonable expectation that
Executive will return to perform services for Kaydon.
a. Circumstances . This Agreement
applies if Executive’s Separation from Service occurs as a
result of:
i. Termination By Kaydon .
Termination by Kaydon (or the Subsidiary employing Executive) for
reasons other than For Cause and other than as a consequence of
Executive’s death, permanent disability or attainment of the
normal retirement date under the Kaydon Corporation Retirement Plan
(the Retirement Plan) or other Kaydon retirement plan applicable to
Executive, as in effect immediately preceding that date;
or
ii. By Executive . Termination by
Executive following the occurrence of any of the following
events:
A. Demotion . The assignment of
Executive to any duties or responsibilities that are a reduction
of, or are materially inconsistent with, Executive’s
position, duties, responsibilities or status immediately preceding
the beginning of the Protected Period;
B. Reporting . A change in
Executive’s reporting responsibilities or titles in effect
immediately preceding the beginning of the Protected Period
resulting in a reduction of Executive’s responsibilities or
position;
C. Reduction . The reduction of
Executive’s annual salary, projected or target annual bonus
(including any deferred portions), level of benefits (except for a
reduction uniformly applicable to all similarly situated
executives), target long-term incentives, stock options, projected
Supplemental Executive Retirement Plan benefits, or supplemental
compensation in effect at the beginning of the Protected Period;
or
D. Location . The transfer of
Executive to a location at least fifty miles from Executive’s
location at the beginning of the Protected Period requiring a
change in residence or a material increase in the amount of travel
normally required of Executive in connection with
employment.
b. Rights and Benefits . The rights
and benefits under this Agreement are all of the
following:
i.
Additional Compensation . Payment of an amount equal
to:
A. Salary .
times the greater of the Executive’s base salary for the
calendar year in which the Separation from Service occurs or for
the preceding calendar year; plus
B. Bonus
.
times the greater of:
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The
average bonus payable to Executive over the most recent three-year
fiscal period (or the period during which the Executive has been
employed by Kaydon (or any of its Subsidiaries ) if less
than three years); or
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Executive’s target bonus for
the calendar year in which the Separation from Service
occurs.
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ii. Incentive Compensation .
Payment of all amounts to which Executive is entitled under all
incentive compensation plans maintained by Kaydon or any Subsidiary
or to which Executive would be entitled to by virtue of
Executive’s employment with the corporation or entity which
succeeds Kaydon after a Change in Control.
A. Incentive Compensation Plans .
This amount includes, but is not limited to, any award under any
Kaydon incentive compensation plan for a prior year that has not
been paid to Executive at the time of termination of
employment.
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B. Increase . In addition,
Executive shall receive an amount equal to 1/12 of the greater
of:
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The
projected incentive compensation plan awards for the year in which
termination of employment occurs; or
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The
incentive compensation plan awards to the Executive for the most
recently ended plan year,
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for each full
or partial month in the current plan year prior to the month of
Executive’s termination of employment.
C. Acceleration . This Subsection
(ii) may not accelerate the time, or modify the form, of any
payment to Executive unless Executive’s employment is
terminated within two years after a Change in Control as defined in
Section 5.b. occurs.
iii. Supplemental Executive Retirement
Plan Benefits . In the event that Executive incurs a Separation
from Service within two years of the date that a Change in Control
occurs, payment of the Actuarial Equivalent (except as limited
below) of the Executive’s vested Accrued Benefit under the
Kaydon Corporation Supplemental Executive Retirement Plan (the
SERP), if any, adjusted as provided in this subsection iii to the
extent applicable to the Executive.
A. Vesting . If the Executive is
not otherwise vested in the SERP Accrued Benefit, Executive will
fully vest in the Executive’s Accrued Benefit under the SERP
if the Executive:
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Is
age 55 or older at the time of the Change in Control;
and
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Is
fully vested in the Retirement Plan (or would be fully vested if
Executive was a participant in that Plan) at the time of the Change
in Control.
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B. Additional Credit .
Executive’s benefit and Accrued Benefit under the SERP will
be computed by crediting the Executive with the Additional Credit
provided in Section 2.19(b) and the Discretionary Credit
provided in Section 2.19(b) of the SERP if the Executive
qualifies for that credit at that time or, if the Executive does
not otherwise qualify for that credit at the time of the Change in
Control under the terms of that Section 2.19(a) or (b), the
Executive:
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Has
been (and remains) identified in the SERP as an individual eligible
for that Additional or Discretionary Credit or was removed as an
individual eligible for that Credit in anticipation of the Change
in Control; and
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Is
vested in the Executive’s Accrued Benefit under the SERP
under the terms of the SERP or subsection A, above.
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C. Actuarial Equivalent . The
Actuarial Equivalent of the payments from the SERP determined under
that Plan and this subsection shall be determined by taking into
account the reduction for early commencement of benefits imposed by
that Plan and by using reasonable actuarial assumptions. For
purposes of determining the lump sum actuarial equivalent, the
corresponding actuarial assumptions provided in the Retirement Plan
(or, to the extent not provided in that Plan, as provided under
GATT) shall be used.
D. Effect . If Executive is a
Participant in the SERP, the execution of this Agreement
constitutes:
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An
amendment of the SERP with respect to Executive to effect these
provisions;
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Agreement by Executive to the terms
of, and consent in accordance with Section 6.1(a) of the SERP
to, the amended and restated SERP adopted by the Board of Directors
on May 17, 2007 and to the amendments to the SERP provided in
this Agreement;
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Agreement by Kaydon and Executive
that Executive may not be removed from the Additional Credit
provisions of the SERP once steps to effect a Change in Control
have commenced; and
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Agreement by Kaydon and Executive
that Executive’s employment with any successor to Kaydon
shall not cause forfeiture of Executive’s benefits under the
SERP under Section 3.6(a) of the SERP.
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Payment of the
SERP benefit as provided by this Agreement satisfies Kaydon’s
obligations to Executive, if any, under the SERP. If
Executive’s employment is terminated in anticipation of a
Change in Control but a Change in Control does not occur,
subsections A., B. and D. shall operate but payment of the SERP
benefit will occur under the terms of the SERP without acceleration
under this Agreement.
E. Limitation . Notwithstanding any
other provision of this Agreement, this subsection (iii) does
not provide any SERP benefit to Executive if Executive is not an
Active Participant in the SERP immediately prior to the Change in
Control, unless Executive was removed as an Active Participant in
the SERP or the SERP was amended or terminated in anticipation of
the Change in Control.
F. Acceleration . This Subsection
(ii) may not accelerate the time, or modify the form, of any
payment to Executive unless Executive incurs a Separation from
Service within two years after a Change in Control as defined in
Section 5.b. occurs. If the Executive’s Separation from
Service occurs within two years after a Change in Control as
defined in Section 5.b., the Executive’s SERP benefit
will be paid as a lump sum payment within 30 days of the date
the Separation from Service occurs. If the Executive’s
Separation from Service occurs other than as provided above, the
Executive’s SERP benefit will be paid at the time and in the
form provided in the SERP without regard to the acceleration of
payment and change to the lump sum form provided by this Agreement,
but within the other modifications provided here.
iv. Other Compensation . Immediate
acceleration of vesting and exercisability of any outstanding stock
option, stock appreciation right, restricted stock, or other
similar incentive compensation rights. This provision may not
accelerate the time, or modify the form, of any payment to
Executive unless Executive’s employment is terminated within
two years after a Change in Control as defined in Section 5.b.
occurs.
v. Insurance and Other Special
Benefits . Continued coverage under the life insurance and
medical, dental and prescription drug insurance or other coverage
(i.e., provision of in kind benefits or reimbursement of expenses
incurred by Executive covered by the medical, dental and
prescription drug plans, to the extent the expenses are referred to
in Section 105(b) of the Internal Revenue Code) of Kaydon and its
Subsidiaries (or any successor plan or program in effect at
or after termination of Executive’s employment for employees
in the same class or category as was Executive prior to
termination) for the period provided in (A), below, subject to the
conditions provided in (B), below.
A.
Period . These benefits will be provided until the earlier
of:
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One
year from the date of termination of Executive’s
employment;
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The
Executive’s Normal Retirement Date (as defined in the
Retirement Plan) (and, in the case of medical insurance, until
Executive is eligible for Parts A and B of Medicare or their
equivalent, if later); or
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The
date Executive obtains reasonably comparable life insurance,
medical insurance, dental insurance, accident insurance, or
disability insurance, as the case may be, at no greater cost to
Executive than was the case at Kaydon.
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The one year
limitation provided above will not apply if Executive:
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Is
age 55 or older at the time of the Change in Control;
and
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Is
fully vested in the Retirement Plan (or would be fully vested if
Executive was a participant in that Plan) at the time of the Change
in Control.
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B. Conditions . Continued coverage
is subject to the terms of the governing plans (other than any
exclusion preventing Executive’s participation because
Executive is no longer an employee), to Executive’s making
any payments for coverage required of employees in the same class
or category as was Executive prior to termination, and to any
limitations necessary to comply with Section 409A and avoid
penalties on the Executive under Section 409A. Executive
agrees to waive any continued coverage that exceeds the limits
imposed by Section 409A. In addition:
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The
in kind benefits and the amount eligible for reimbursement during a
taxable year of Executive may not affect the in kind benefits to be
provided or reimbursement in any other taxable year, except that
the lifetime and other benefit limits of the medical, dental and
prescription drug plans continue to apply.
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The
reimbursement of an eligible amount must be made on or before the
last day of Executive’s taxable year next following the
taxable year in which the expense being reimbursed was
incurred.
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The
right to this in kind benefit or reimbursement is not subject to
liquidation or exchange for any other benefit.
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C. Alternative . If Executive is
ineligible to continue to be covered under the terms of any such
benefit plan or program, or in the event Executive is eligible but
the benefits applicable to Executive under any such plan or program
after termination of employment are not substantially equivalent to
the benefits applicable to Executive immediately prior to
termination, Kaydon shall provide such substantially equivalent
benefits, or such additional benefits as may be necessary to make
the benefits applicable to Executive substantially equivalent to
those in effect before termination of Executive’s employment,
through other sources, subject to all of the limitations and
conditions provided above.
D. Other . Nothing contained in
this subsection (v) shall be deemed to require or permit
termination or restriction of Executive’s coverage under any
other plan or program of Kaydon or any of its subsidiaries
or any successor plan or program to which Executive is
entit
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