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Exhibit 10.5
EXECUTIVE EMPLOYMENT
AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (the
"Agreement") is effective as of January 1, 2007 (the "Effective
Date") between Kaman Music Corporation (the "Company"), a
subsidiary of Kaman Corporation (a Connecticut corporation)
("Kaman"), and Robert H. Saunders, Jr. (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive is currently employed as
the President of the Company;
WHEREAS, the Company has offered to continue
employing the Executive on the terms set forth below;
and
WHEREAS, the Executive has agreed to continued
employment with the Company on the terms as set forth
below;
NOW THEREFORE, in consideration of the foregoing,
of the mutual promises contained herein and of other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as
follows:
1. EMPLOYMENT
TERM.
The Executive’s term of employment under
this Agreement shall be for a term commencing on the Effective Date
and, unless terminated earlier as provided in Section 7 hereof,
ending on June 30, 2007 (such term of employment is herein referred
to as the "Employment Term").
2. POSITION &
DUTIES.
(a) The Executive
shall serve as the President of the Company under this Agreement
during the Employment Term. As President of the Company, the
Executive shall have such duties, authorities and responsibilities
commensurate with the duties, authorities and responsibilities of
persons in similar capacities in similarly sized companies and such
other duties and responsibilities as the CEO of Kaman or the
Company’s Board of Directors (the "Sub Board") shall
designate that are consistent with the Executive’s position
as President of the Company.
(b) During the
Employment Term, the Executive shall use the Executive’s best
reasonable efforts to perform faithfully and efficiently the duties
and responsibilities assigned to the Executive hereunder (including
applicable obligations under state law) and devote substantially
all of the Executive’s business time (excluding periods of
vacation and other approved leaves of absence) to the performance
of the Executive’s duties with the Company, provided the
foregoing shall not prevent the Executive from (i) participating in
charitable, civic, educational, professional, community or industry
affairs or, with prior written approval of the Sub Board, serving
on the board of directors or advisory boards of other companies;
and (ii) managing the Executive’s and the Executive’s
family’s personal investments so long as such activities do
not materially interfere with the performance of the
Executive’s duties hereunder or create a potential business
conflict or the appearance thereof. If at any time service on any
board of directors or advisory board would, in the good faith
judgment of the Sub Board, conflict with the Executive’s
fiduciary duty to the Company or create any appearance thereof, the
Executive shall promptly resign from such other board of directors
or advisory board after written notice of the conflict is received
from the Sub Board.
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(c) The Executive
further agrees to serve without additional compensation as an
officer and director of any of the Company’s subsidiaries and
agrees that any amounts received from any such corporation may be
offset against the amounts due hereunder.
3. BASE SALARY. The
Company agrees to pay the Executive a base salary (the "Base
Salary") during the Employment Period at an annual rate of $307,000
(subject to possible increase if Kaman’s Board of Directors
(the "Parent Board"), in its sole discretion, so determines),
payable in accordance with the regular payroll practices of the
Company, but not less frequently than monthly
.
4. BONUSES. The
Executive shall be eligible to participate in the Company’s
bonus and other short- and long-term incentive compensation plans
and programs for the Company’s senior executives at a level
commensurate with the Executive’s position during the
Employment Term. The Executive shall have the opportunity to earn
an annual target bonus measured against performance criteria to be
determined by the Parent Board (or a committee thereof) of at least
50% of Base Salary as an initial target bonus opportunity as
described in the terms of the Company’s annual bonus plan as
then in effect. Except as provided under Section 8 of the
Agreement, the Executive shall receive payments with respect to the
plans and programs described in this Section 4 in accordance with
the terms of such plans and programs.
5. EQUITY AWARDS.
The Executive shall be eligible to receive additional grants of
stock options, stock appreciation rights, restricted stock and
other equity awards at the sole discretion of the Parent Board or
its Personnel and Compensation Committee (the "Committee"). The
Executive shall be subject to, and shall comply with, Kaman’s
stock ownership guidelines (unless waived by the Compensation
Committee) and Kaman’s reasonable policies regarding
forfeitures of cash and equity incentive awards due to material
financial restatements due to executive misconduct, as may be in
effect from time to time, it being agreed that any such policies
shall only be effective with respect to awards made on or after the
Effective Date. If there is a Change in Control (as defined in the
Kaman Corporation 2003 Stock Incentive Plan in effect on the date
hereof), all then outstanding unvested equity awards granted to the
Executive (for example, stock options, stock appreciation rights
and restricted stock), whether under this Agreement or otherwise,
will fully vest and become non-forfeitable and remain exercisable
in accordance with the terms of the applicable Company
plans.
6. EMPLOYEE
BENEFITS.
(a) BENEFIT PLANS.
The Executive shall be entitled to participate in all employee
benefit plans of the Company including, but not limited to,
pension, thrift, profit sharing, medical coverage, education, other
retirement or welfare benefits and perquisites (as approved by the
Committee) that the Company has adopted or may adopt, maintain or
contribute to for the benefit of its senior executives at a level
commensurate with the Executive’s position subject to
satisfying the applicable eligibility requirements.
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(b) VACATION. The
Executive shall be entitled to at least 3 weeks paid vacation per
year. Vacation may be taken at such times as the Executive elects
with due regard to the needs of the Company. Unused vacation at the
end of a calendar year shall be forfeited according to the
Company's vacation policy.
(c) AUTOMOBILE. The
Company shall provide the Executive with a leased automobile as
approved by the Committee as per the Company’s perquisites
policy from time to time.
(d) BUSINESS AND
ENTERTAINMENT EXPENSES. Upon presentation of appropriate
documentation, the Executive shall be reimbursed in accordance with
the Company’s expense reimbursement policy for all reasonable
and necessary business and entertainment expenses incurred in
connection with the performance of the Executive’s duties
hereunder.
(e) CERTAIN
AMENDMENTS. Nothing herein shall be construed to prevent the
Company from amending, altering, eliminating or reducing any plans,
benefits or programs so long as the Executive continues to receive
compensation and benefits consistent with Sections 3 through
6.
(f) LIFETIME LIFE
INSURANCE. During the Employment Term and thereafter (regardless of
the reason for the termination of the Employment Term), the Company
shall cause Kaman to continue to make regular periodic premium
payments for life insurance coverage issued under the Senior
Executive Life Insurance Program for the remainder of the
Executive’s life.
7. TERMINATION. The
Executive’s employment and the Employment Term shall
terminate on the first of the following to occur:
(a) DISABILITY. Upon
written notice by the Company to the Executive of termination due
to Disability, while the Executive remains Disabled. For purposes
of this Agreement, "Disability" shall be deemed the reason for the
termination by the Company of the Executive’s employment, if,
as a result of the Executive incapacity due to physical or mental
illness, the Executive shall have been absent from fully performing
the Executive’s duties with the Company for a period of 6
consecutive months, the Company shall have provided a notice of
termination under this Section 7(a), and, within thirty days after
such notice being given, the Executive shall not have returned to
the fully performing the Executive’s duties
hereunder.
(b) DEATH.
Automatically on the date of death of the Executive.
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(c) CAUSE.
Immediately upon written notice by the Company to the Executive of
a termination for Cause. "Cause" shall mean (i) Executive’s
conviction of (or a plea of guilty or nolo contendere to) a felony
or any crime involving moral turpitude, dishonesty, fraud, theft or
financial impropriety; or (ii) a determination by a majority of the
Parent Board in good faith that Executive has (A) willfully and
continuously failed to perform substantially the Executive’s
duties (other than any such failure resulting from the
Executive’s Disability or incapacity due to bodily injury or
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Parent Board that
specifically identifies the manner in which the Parent Board
believes that the Executive has not substantially performed the
Executive’s duties, (B) engaged in illegal conduct, an act of
dishonesty or gross misconduct, in each case which is in the course
of the Executive’s employment and materially injurious to
Kaman or the Company, or (C) willfully violated a material
requirement of Kaman’s or the Company’s code of conduct
or the Executive’s fiduciary duty to the Company. No act or
failure to act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith and without reasonable belief that the
Executive’s action or omission was in, or not opposed to, the
best interests of the Company. Notwithstanding the foregoing, Cause
shall not include any act or omission of which the Audit Committee
of the Parent Board (or the full Parent Board) has had actual
knowledge of all material facts related thereto for at least 90
days without asserting that the act or omission constitutes
Cause.
(d) WITHOUT CAUSE.
Upon written notice by the Company to the Executive of an
involuntary termination without Cause and other than due to death
or Disability.
(e) GOOD REASON.
Upon written notice by the Executive to the Company of a
termination for Good Reason, unless such events are corrected in
all material respects by the Company within 30 days following
written notification by the Executive to the Company, that the
Executive intends to terminate the Executive’s employment
hereunder for one of the reasons set forth below. "Good Reason"
shall mean, without the Executive’s express written consent,
the occurrence of any of the following events:
(1) the Company
removing the Executive from the position of President of the
Company (other than for Cause);
(2) a reduction of
the Executive’s Base Salary, annual initial target bonus
opportunity or modified bonus opportunity to the extent the
modification to the initial target bonus opportunity is adverse to
the Executive relative to the modification made to the initial
target bonus opportunity of other senior officers of the
Executive’s business unit;
(3) a failure to pay
the Executive’s compensation or benefits provided or referred
to under this Agreement;
(4) the Executive
being required to relocate to a principal place of employment more
than 50 miles from the Executive’s principal place of
employment with the Company as of the Effective Date;
(5) the assignment
of duties to the Executive that are materially inconsistent with
the Executive’s position as President of the Company;
or
(6) the Executive no
longer being a direct report to the CEO of Kaman prior to a Change
in Control (as defined in the Change in Control
Agreement).
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Notwithstanding the foregoing, (i) a suspension
of the Executive’s title and authority while on
administrative leave due to a reasonable belief that the Executive
has engaged in misconduct, whether or not the suspected misconduct
constitutes Cause for employment termination, shall not be
considered "Good Reason"; provided that if such leave is unpaid and
either the Executive returns to full-time employment under this
Agreement or it is subsequently determined the Executive’s
employment is to be terminated without Cause, then the compensation
and benefits that would have been payable during such leave will be
paid as soon as reasonably practicable with interest at the prime
rate beginning as of the date such leave commenced plus 100 basis
points; (ii) an event shall not be considered Good Reason if the
Executive fails to deliver notice of termination for Good Reason
within 90 days of the Executive’s actual knowledge of the
event, and (iii) prospective changes to employee benefits (as
defined in Section 6) for future employment made on an
across-the-board basis to all similarly situated executives of the
Company and its subsidiaries shall not be considered Good
Reason.
(f) WITHOUT GOOD
REASON. Upon 60 days’ prior written notice by the Executive
to the Company of the Executive’s termination of employment
without Good Reason (which the Company may, in its sole discretion,
make effective earlier than any notice date).
(g) RETIREMENT. Upon
remaining employed with the Company until at least March 31, 2007
(the "Retirement Eligibility Date"). Nothing herein shall be
construed as limiting the Executive’s right, if any, to
terminate employment prior to the Retirement Eligibility Date and
receive compensation and benefits, as applicable, provided under
the respective terms of the Company’s benefit
plans.
8. CONSEQUENCES OF
TERMINATION. Any termination payments made and benefits provided
under this Agreement to the Executive shall be in lieu of any
termination or severance payments or benefits for which the
Executive may be eligible under any of the plans, policies or
programs of the Company or its affiliates as may be in effect from
time to time including but not limited to the Change in Control
Agreement. Except to the extent otherwise provided in this
Agreement, all benefits, including, without limitation, stock
options, stock appreciation rights, restricted stock units and
other awards under the Company’s long-term incentive
programs, shall be subject to the terms and conditions of the plan
or arrangement under which such benefits accrue, are granted or are
awarded. Subject to Section 9, the following amounts and benefits
shall be due to the Executive.
(a) DISABILITY. Upon
employment termination due to Disability, the Company shall pay or
provide the Executive (i) any unpaid Base Salary through the date
of termination and any accrued vacation in accordance with Company
policy; (ii) any unpaid bonus or other short-term and long-term
incentive compensation as described in Section 4 above earned with
respect to any completed fiscal year; (iii) reimbursement for any
unreimbursed expenses incurred through the date of termination;
(iv) all other payments and benefits to which the Executive may be
entitled under the terms of any applicable compensation arrangement
or benefit, equity or perquisite plan or program or grant or this
Agreement, including but not limited to any applicable pension,
retirement and insurance benefits (collectively, "Accrued
Amounts"). Executive will also be paid a pro-rata portion of the
Executive’s annual bonus for the performance year in which
the Executive’s termination occurs, payable at the time that
annual bonuses are paid to other senior executives (determined by
multiplying the amount the Executive would have received had
employment continued through the end of the performance year by a
fraction, the numerator of which is the number of days during the
performance year of termination that the Executive is employed by
the Company and the denominator of which is 365).
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(b) DEATH. In the
event the Employment Term ends on account of the Executive’s
death, the Executive’s estate (or to the extent a beneficiary
has been designated in accordance with a program, the beneficiary
under such program) shall be entitled to any Accrued Amounts,
including but not limited to proceeds from any Company sponsored
life insurance programs. Executive’s estate (or beneficiary)
will also be paid a pro-rata portion of the Executive’s
annual bonus for the performance year in which the
Executive’s death occurs, payable at the time that annual
bonuses are paid to other senior executives (determined by
multiplying the amount the Executive would have received based upon
target performance had employment continued through the end of the
performance year by a fraction, the numerator of which is the
number of days during the performance year of termination that the
Executive is employed by the Company and the denominator of which
is 365).
(c) TERMINATION FOR
CAUSE OR WITHOUT GOOD REASON. If the Executive’s employment
should be terminated (i) by the Company for Cause, or (ii) by the
Executive without Good Reason, the Company shall pay to the
Executive any Accrued Amounts.
(d) TERMINATION
WITHOUT CAUSE OR FOR GOOD REASON. If the Executive’s
employment by the Company is terminated by the Company other than
for Cause (other than a termination due to Disability or death) or
by the Executive for Good Reason, then the Company shall pay or
provide the Executive with:
(1) Accrued
Amounts;
(2) a pro-rata
portion of the Executive’s annual bonus for the performance
year in which the Executive’s termination occurs, payable at
the time that annual bonuses are paid to other senior executives
(determined by multiplying the amount the Executive would have
received based upon actual financial performance had employment
continued through the end of the performance year by a fraction,
the numerator of which is the number of days during the performance
year of termination that the Executive is employed by the Company
and the denominator of which is 365);
(3) an amount equal
to the product of (a) 50% times (b) the sum of (i) the
Executive’s then Base Salary and (ii) the most recent annual
bonus paid to the Executive (or awarded by the Parent Board or the
Committee for the preceding calendar year if not then paid), times
(c) a fraction, the numerator of which is the number of days from
the Executive’s employment termination date until the end of
the Employment Term, and the denominator of which is 180, payable
in a single lump sum commencing on the earliest payroll date that
does not result in adverse tax consequences to Executive under
Section 409A of the Code;
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(4) each cash-based
long-term performance award for which the performance period has
not yet been completed as of the date of such termination shall be
deemed fully vested and fully earned and then shall be cancelled in
exchange for a cash payment equal to 100% of the target value of
such award multiplied by a fraction, the numerator which is the
number of days the Executive remained employed with the Company
during the award’s performance period and the denominator of
which is the total number of days during the award’s
performance period;
(5) title to the
Company automobile to the Executive on an "as is" basis, with the
automobile’s fair market value being taxable to the
Executive; and
(6) subject to the
Executive’s continued co-payment of premiums, if required
under Company policy, continued participation for 24 months but in
no event later than the Retirement Eligibility Date in all medical,
dental and vision plans which cover the Executive (and eligible
dependents) upon the same terms and conditions (except for the
requirements of the Executive’s continued employment) in
effect for active employees of the Company. In the event the
Executive obtains other employment that offers substantially
similar or improved benefits, as to any particular medical, dental
or vision plan, such continuation of coverage by the Company for
such similar or improved benefit under such plan under this
subsection shall immediately cease. The continuation of health
benefits under this subsection shall reduce and count against the
Executive’s rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA").
(e) RETIREMENT. If
the Executive terminates employment on or following the
Executive’s Retirement Eligibility Date, the Company shall
pay to the Executive:
(1) any Accrued
Amounts;
(2) a pro-rata
portion of the Executive’s annual bonus for the performance
year in which the Executive’s retirement occurs, payable at
the time that annual bonuses are paid to other senior executives
(determined by multiplying the amount the Executive would have
received based upon actual financial performance had employment
continued through the end of the performance year by a fraction,
the numerator of which is the number of days during the performance
year of termination that the Executive is employed by the Company
and the denominator of which is 365);
(3) each cash-based
long-term performance award for which the performance period has
not yet been completed as of the date of s
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