Exhibit 10.1
KAYDON
CORPORATION
EXECUTIVE MANAGEMENT
BONUS PROGRAM
1.
Definitions . The following terms have the meanings
indicated unless a different meaning is clearly required by the
context:
“Approval Date” means
March 2, 2005, which is the date on which this Bonus Plan was
approved by the Board of Directors of the Company.
“Bonus Plan” means this
Kaydon Corporation Executive Bonus Program, as amended from time to
time.
“Cause” means a
determination by the Company that a Participant has committed a
fraud or felony, engaged in deliberate, willful or gross
misconduct, or in conduct detrimental to the Company team effort,
or was insubordinate, or performed in an overall unacceptable
manner, or violated the policies of the Company as may be
established by the Company from time-to-time, or committed an act
of moral turpitude, or committed any other act that causes or may
reasonably be expected to cause substantial injury to the Company
or to its reputation.
“Change in Control” means
(i) the failure of the Continuing Directors at any time to
constitute at least a majority of the Board of Directors of the
Company, (ii) the acquisition by any Person other than an
Excluded Holder of beneficial ownership (within the meaning of
Rule 13d-3 issued under the Securities Exchange Act of 1934,
as amended) of 20% or more of the outstanding Common Stock of the
Company or the combined voting power of the Company’s
outstanding voting securities, (iii) the approval by the
stockholders of the Company of a reorganization, merger or
consolidation unless with a Permitted Successor, or (iv) the
approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company or a sale or disposition
of all or substantially all of its assets other than to a Permitted
Successor.
“Committee” means the
Compensation Committee of the Company’s Board of Directors,
each of the members of which is a “non-employee
director” within the meaning of Rule 16b-3.
“Company” means Kaydon
Corporation and any of its wholly-owned subsidiaries or
affiliates.
“Continuing Directors”
means the individuals constituting the Board of Directors of the
Company on the Approval Date, and any subsequent directors whose
election or nomination for election was approved by a vote of 2/3
or more of the individuals who are then Continuing Directors, but
specifically excluding any individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board of Directors of the Company.
“Excluded Holder” means
any Person who on the Approval Date was the beneficial owner of 20%
or more of the outstanding Common Stock of the Company, a
subsidiary of the Company, any employee benefit plan of the Company
or any subsidiary of the Company or any trust holding such Common
Stock pursuant to the terms of an employee benefit plan of the
Company.
“Executive Officer” means
Brian P. Campbell, John F. Brocci, Kenneth W. Crawford, Peter C.
DeChants, John R. Emling, John A. Madison and such other senior
executive officers of the Company as the Committee shall designate
from time to time.
“Good Reason” means
(a) the assignment of a Participant to any duties or
responsibilities that are a reduction of, or are materially
inconsistent with, the Participant’s position, duties,
responsibilities or status on the Approval Date, (b) a change
in a Participant’s reporting responsibilities or titles in
effect on the Approval Date that results in a reduction of the
Participant’s responsibilities or position, (c) the
reduction of a Participant’s annual salary, level of benefits
(except for a reduction uniformly applicable to all similarly
situated executives), projected Supplemental Executive Retirement
Plan benefits, or (d) transfer of the Participant to a
location more than forty (40) miles from the
Participant’s location of employment on the Approval Date
which requires a change in residence or a material increase in the
amount of travel normally required of the Participant in connection
with his employment.
“Permitted Successor”
means a corporation that immediately after the consummation of a
transaction described in the definition of “Change in
Control” satisfies all of the following criteria: (a) at
least 60% of the voting securities of such corporation is
beneficially owned by Persons who were the beneficial owners of the
Company’s Common Stock immediately prior to such transaction,
(b) no Person other than an Excluded Holder beneficially owns,
directly or indirectly, 20% or more of the outstanding voting
securities of such corporation and (c) at least a majority of
the Board of Directors of such corporation is comprised of
Continuing Directors.
“Person” means a natural
person, corporation, partnership, limited liability company,
government or political subdivision, agency or instrumentality of a
government.
2.
Purpose . The purpose of this Bonus Plan is to provide
annual incentives to certain senior executive officers in a manner
designed to reinforce the Company’s performance goals; to
link a significant portion of participants’ compensation to
the achievement of such goals; and to continue to attract, motivate
and retain key executives on a competitive basis.
3.
Participation . Participants in this Bonus Plan are those
Executive Officers who are designated by the Committee to
participate from time to time. The Committee shall also determine
the effective date of a Participant’s participation in this
Bonus Plan. Each Participant shall execute an Agreement annually, a
form of which is attached hereto as Exhibit A, acknowledging
his willingness to participate in this Bonus Plan and agreeing to
preserve corporate opportunity with the Company for a period ending
two years following receipt of the last bonus payment made pursuant
to this Bonus Plan. The Company may modify and amend the Agreement
at its discretion prior to each Bonus Plan year.
4.
Performance Metric and Adjustments . The metric, or
benchmark, against which Company performance shall be measured for
purposes of determining whether bonuses shall be awarded to
Participants, and the amount of such bonuses, shall be earnings
before interest, taxes, depreciation and amortization
(“EBITDA”) from continuing operations.
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5.
Performance Objective . The performance objective for each
year will be Target EBITDA, which shall be determined by the
Committee each year at a regular Board of Directors meeting
occurring prior to the 90 th day of the year
for which Target EBITDA is to be determined. In conjunction with,
or promptly after, the presentation of the annual budget for the
following year, management will present to the Committee a
recommended Target EBITDA for the following fiscal year. The
Committee shall evaluate the recommended Target EBITDA and Budget
and may determine the final Target EBITDA utilizing this
information and any additional information that it deems
relevant.
6.
Bonus Calculations . Participant bonuses shall be based on
the level of EBITDA achieved for the fiscal year, compared to
Target EBITDA for that year, in accordance with the following:
(a) No Bonus payout shall be made if
EBITDA achieved is equal to or less than 80% of Target EBITDA;
(b) Bonus payments will equal 3% of
base salary for each Participant for each 1% that EBITDA achieved
for the year exceeds 80% of Target EBITDA, up to 114% of Target
EBITDA. An example would be:
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(a) |
if EBITDA is 83% of Target EBITDA, the bonus will be 9% of a
Participant’s base salary; |
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(b) |
if EBITDA is 100% of Target EBITDA, the bonus will be 60% of a
Participant’s base salary; and |
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(c) |
if EBITDA is 109% of Target EBITDA, the bonus will be 87% of a
Participant’s base salary. |
(c) A Participant’s bonus may
not exceed 100% of the Participant’s base salary.
7.
Discretionary Bonus Payments . In addition, at the
discretion of the Committee, a discretionary cash bonus may be paid
to any Participant in an amount up to 25% of base salary that shall
be in addition to, or in lieu of, the bonus payment, if any,
determined pursuant to Section 6.
8.
Payment of Bonus Awards .
(a) Conditions for Payment After
Termination of Employment . If a Participant’s employment
with the Company terminates, the following provisions shall
apply:
(i)
Termination for Cause . If a Participant’s employment
is terminated by the Company for Cause, no bonus shall be paid to
the former Participant for any period prior to the date of
termination.
(ii)
Termination by Participant . If a Participant terminates his
or her employment without Good Reason, no bonus shall be paid to
the former Participant for any period prior to the date of
termination.
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(iii)
Termination Following Death, Disability or Retirement . If a
Participant’s employment is terminated due to a
Participant’s death, disability or retirement at the normal
retirement age prior to payment of a bonus award, such bonus shall
be paid (A) in the event of death, to the designated
beneficiary of the Participant or, if no beneficiary shall have
been designated, the representative of the Participant’s
estate and (B) in the event of disability or retirement, to
the former Participant, and if termination occurs during a fiscal
year, the amount of bonus award shall be pro rated for that year
based on the number of days worked prior to termination of
employment.
(iv)
Termination without Cause or for Good Reason, etc . If a
Participant’s employment is terminated without Cause, or the
Participant terminates his or her employment for Good Reason
following a Change in Control and prior to the payment of a bonus
award, the Company shall nevertheless pay such bonus to the
terminated Participant. If termination occurs during a fiscal year,
the amount of bonus award shall be pro rated for that year based on
the number of days worked prior to termination of employment.
(b) Change in Control Payment
. In the event of a Change in Control of the Company, a bonus for
the year in which the Change in Control occurs, together with any
unpaid bonus from the preceding year, shall be immediately payable
on the date of the Change in Control. Such bonus shall be equal to
100% of a Participant’s base salary for the year in which a
Change in Control occurs.
9.
Administrative Provisions . This Bonus Plan shall be
administered by the Committee. The Committee shall have full,
exclusive and final authority in all determinations and decisions
affecting this Bonus Plan and Participants, including sole
authority to interpret and construe any provision of this Bonus
Plan, to adopt such rules and regulations for administering this
Bonus Plan as it may deem necessary or appropriate under the
circumstances, and to make any other determination it deems
necessary or appropriate for the administration of this Bonu
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