EXHIBIT 10.12
KAYDON CORPORATION
CHANGE IN CONTROL COMPENSATION AGREEMENT
AGREEMENT made and executed 3 October, 2002 between KAYDON CORPORATION,
a Delaware corporation, 000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxx 00000 ("Kaydon"), and Xxxxx X. XxXxxxxx, ("Executive").
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 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's employment is terminated 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).
a. Circumstances. This Agreement applies if Executive's employment is
terminated:
i. By Kaydon. 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. 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. Three (3) times the greater of the
Executives base salary for the calendar year in which the termination of
employment occurs or for the preceding calendar year; plus
B. Bonus. Three (3) times the greater of:
- 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
- Executive's target bonus for the calendar year in which the termination
of employment occurs.
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
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employment with the corporation or entity which succeeds Kaydon after a Change
in Control.
A. Kaydon Incentive Compensation Plan. This amount
includes, but is not limited to, any award under the Kaydon Incentive
Compensation Plan (Incentive Plan) for a prior year which has not been paid to
Executive at the time of termination of employment.
B. Increase. In addition, Executive shall receive an
amount equal to 1/12 of the greater of:
- The projected Incentive Plan award for the year in which
termination of employment occurs; or
- The award to the Executive for the most recently ended plan year,
for each full or partial month in the current plan
year prior to the month of Executive's termination of employment.
iii. Supplemental Executive Retirement Plan Benefits. Payment
of the Actuarial Equivalent 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:
- Is age 55 or older at the time of the Change in Control; and
- 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.
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 2.17(a) 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 2.17(a), the Executive:
- Has been (and remains) identified in the SERP as an individual
eligible for that Additional Credit or was removed as an
individual eligible for that Credit in anticipation of the Change
in Control; and
- Is vested in the Executive's Accrued Benefit under the SERP under
the terms of the SERP or subsection A, above.
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
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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:
- An amendment of the SERP with respect to Executive to effect
these provisions; and
- Agreement by Executive to the terms of, and in consent in
accordance with Section 6.1 (a) of the SERP to, the amended and
restated SERP dated August 1, 1998 and to the amendments to the
SERP provided in this Agreement.
Payment of the SERP benefit as provided by this Agreement satisfies Kaydon's
obligations to Executive, if any, under the SERP.
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.
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.
v. Insurance and Other Special Benefits. Continued coverage
under the life insurance, medical and dental insurance, and accident and
disability insurance plans 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:
- Three years from the date of termination of Executive's
employment;
- 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
- 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.
The three year limitation provided above will not apply if Executive:
- Is age 55 or older at the time of the Change in Control; and
- 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) and to Executive's
making any payments for coverage required of employees in the same class or
category as was Executive prior to termination.
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.
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 entitled under the terms of
such plan or program.
vi. Outplacement Services. Full outplacement services provided
by the professional outplacement consulting firm of Executive's choosing, to a
maximum cost of 15% of the Executive's base salary for the calendar year
preceding the calendar year in which termination of Executive's employment
occurs.
vii. Excise Tax Payment. An additional payment in an amount to
cover the full cost of the golden parachute excise tax, and the Executive's
State and Federal income and employment taxes on this excise tax payment,
applicable to Executive as a result of the rights and benefits or any other
payment under this Agreement, or under any other agreement with, or plan of,
Kaydon or its Subsidiaries.
A. Adjustment. In the event the Internal Revenue
Service subsequently adjusts the excise tax computation described here, Kaydon
shall reimburse the Executive for the full amount necessary to make the
Executive whole (less any amounts received by the Executive that the Executive
would not have received had the computations initially been computed as
subsequently adjusted), including the value of any underpaid excise tax, and any
related interest and/or penalties due to the Internal Revenue Service.
B. Definitions. For purposes of this Agreement, the
term "golden parachute excise tax" has the meaning assigned to the term in
Sections 280G and 4999 of the Internal Revenue Code.
viii. Attorney's Fees. Reimbursement in full for Executive's
attorney's fees and costs reasonably incurred in enforcing this Agreement
against Kaydon or in seeking damages for Kaydon's failure to fully perform its
obligations under this Agreement.
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The specific arrangements referred to in this Subsection (b)
are not intended to exclude Executive's participation in other benefit plans in
which Executive currently participates or which are or may become available to
executive personnel generally in the class or category of Executive or to
preclude other compensation or benefits as may be authorized by the Board of
Directors from time to time.
c. Conditions to the Obligations of Kaydon. Notwithstanding the general
rules, above, Kaydon shall have no obligation to provide or cause to be provided
to Executive the rights and benefits described above if any of the following
events occurs:
i. Prior Termination. Executive terminates employment or
Kaydon (or the appropriate Subsidiary) terminates Executive's employment for any
reason or for no reason at all prior to the time a third person begins a tender
or exchange offer, circulates a proxy to stockholders, or takes other steps to
effect a Change in Control of Kaydon (unless Kaydon (or the appropriate
Subsidiary) terminates Executive's employment in anticipation of the Change in
Control).
ii. Termination for Cause. Kaydon terminates Executive's
employment For Cause.
A. For Cause. For purposes of this Agreement,
termination of employment is For Cause if Executive, in connection with the
Executive's duties as an employee of Kaydon, its Subsidiaries, or any of its
affiliates, committed a fraud or any felony, engaged in deliberate, willful or
gross misconduct, or committed any other act which causes or may reasonably be
expected to cause substantial injury to Kaydon, a Subsidiary, or any of its
affiliates.
B. Limitation. For purposes of clarification, this
use of this For Cause standard for employment termination affects Executive's
entitlement to benefits under this Agreement only and does not generally limit
the ability of Kaydon or other employer to terminate the Executive's employment
for any reason or for no reason at all.
iii. Resignation as Director or Officer. Executive fails,
within a reasonable time after a termination of employment which is not wrongful
on the part of Kaydon (or the Subsidiary employing Executive) and upon receiving
a written request to do so, to resign as a director and/or officer of Kaydon and
each Subsidiary and affiliate of Kaydon of which Executive is then serving as a
director and/or officer.
iv. Termination of Agreement. This Agreement ceases to be
effective as to Executive in accordance with Section 6.
In all other events, Kaydon's obligation to pay or cause to be
paid to Executive the benefits and to make the arrangements provided below is
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set off, counterclaim, recoupment, defense or
other right which Kaydon may have against Executive or anyone else. Except as
provided in Section 2(b)(v), Executive's entitlement to benefits under this
Agreement is not subject to any duty to
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mitigate damages by seeking further employment nor offset by any compensation
which Executive may receive from future employment.
3. Confidentiality and Cooperation. Executive agrees that at all times:
a. Confidentiality. Executive will not, without the prior
written consent of Kaydon, disclose to any person, firm or corporation any
confidential information of or about Kaydon or its Subsidiaries which is now
known to Executive or which (whether before or after termination) may become
known to Executive as a result of Executive's employment or association with
Kaydon and which could be helpful to a competitor. This limitation does not
apply, however, to confidential information that becomes publicly disseminated
by means other than a breach of this Agreement.
b. Cooperation. Executive will furnish such information and
render such assistance and cooperation as may reasonably be requested in
connection with any litigation or legal proceedings concerning Kaydon or any of
its Subsidiaries (other than any legal proceedings concerning Executive's
employment). In connection with that cooperation, Kaydon will pay or reimburse
Executive for all reasonable expenses incurred in cooperating with such
requests.
The parties agree that damages in the event of breach of this
Section 3 by Executive would be difficult, if not impossible, to ascertain. The
parties therefore agree that Kaydon, in addition to and without limitation of
any other remedy or right it may have, shall have the right to an injunction or
other equitable relief in any court of competent jurisdiction enjoining any such
breach. Executive waives any and all defenses Executive may have to such an
action on the ground of lack of jurisdiction or other equitable relief. The
existence of this right shall not preclude Kaydon from pursuing any other rights
and remedies at law or in equity which Kaydon may have.
4. Release. In exchange for benefits under this Agreement, Executive
agrees that, upon acceptance of those benefits, Executive will release all
claims against Kaydon and its Subsidiaries which might then exist and will
execute a reasonable and customary release of any such claims.
5. Change in Control. For purposes of this Agreement:
a. Change in Control. A Change in Control means:
i. Directors. The failure of the Continuing Directors
at any time to constitute at least a majority of the members of the Board;
ii. Ownership. The acquisition by any Person other
than an Excluded Holder of beneficial ownership (within the meaning of Rule
13d-3 issued under the Act) of 20% or more of the outstanding common stock of
Kaydon or the combined voting power of Kaydon's outstanding securities entitled
to vote generally in the election of directors;
iii. Transaction. The approval by the stockholders of
Kaydon of a reorganization, merger or consolidation, unless with or into a
Permitted Successor; or
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iv. Termination. The approval by the stockholders of
Kaydon of a complete liquidation or dissolution of Kaydon or the sale or
disposition of all or substantially all of the assets of Kaydon other than to a
Permitted Successor.
b. Other Definitions. The following terms are defined as
follows:
i. Continuing Directors. The Continuing Directors are
the individuals constituting the Board as of the date this Agreement was
executed by Kaydon and any subsequent directors whose election or nomination for
election by Kaydon's stockholders was approved by a vote of two-thirds 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 (as the term is used in Rule 14a-11 of
Regulation 14A issued under the Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board.
ii. Excluded Holder. Excluded Holder means any Person
who at the time this Agreement was executed by Kaydon was the beneficial owner
of 20% or more of the outstanding common stock of Kaydon; or Kaydon, a
Subsidiary or any Employee Benefit Plan of Kaydon or a Subsidiary or any trust
holding such common stock or other securities pursuant to the terms of an
Employee Benefit Plan.
iii. Permitted Successor. Permitted Successor means a
corporation which, immediately following the consummation of a transaction
specified in the definition of "Change in Control" above, satisfies each of the
following criteria:
A. Stock. Sixty percent or more of the
outstanding common stock of the corporation and the combined voting power of the
outstanding securities of the corporation entitled to vote generally in the
election of directors (in each case determined immediately following the
consummation of the applicable transaction) is beneficially owned, directly or
indirectly, by all or substantially all of the Persons who were the beneficial
owners of Kaydon's outstanding common stock and outstanding securities entitled
to vote generally in the election of directors (respectively) immediately prior
to the applicable transaction;
B. Limitation. No Person other than an
Excluded Holder beneficially owns, directly or indirectly, 20% or more of the
outstanding common stock of the corporation or the combined voting power of the
outstanding securities of the corporation entitled to vote generally in the
election of directors (for these purposes the term Excluded Holder shall include
the corporation, any subsidiary of the corporation and any Employee Benefit Plan
of the corporation or any such subsidiary or any trust holding common stock or
other securities of the corporation pursuant to the terms of any such Employee
Benefit Plan); and
C. Board. At least a majority of the board
of directors is comprised of Continuing Directors.
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iv. Person. Person has the same meaning as set forth
in Sections 13(d) and 14(d)(2) of the Act.
v. Act. Act means the Securities Exchange Act of
1934, as amended.
vi. Employee Benefit Plan. Employee Benefit Plan
means any plan or program established by Kaydon or a Subsidiary for the
compensation or benefit of employees of Kaydon or any of its Subsidiaries.
vii. Subsidiary. Subsidiary means any corporation or
other entity of which 50% or more of the outstanding voting stock or voting
ownership interest is directly or indirectly owned or controlled by Kaydon or by
one or more Subsidiaries of Kaydon.
6. Terms of Agreement. Subject to Section 2 and the remainder of this
Section 6, this Agreement is effective on October 3, 2002 and shall terminate on
December 31, 2002.
i. Extension. This Agreement shall automatically
renew for successive one-year terms, each ending on the anniversary of December
31, 2002, unless Kaydon notifies Executive in writing at least 30 days prior to
the expiration date of the original or a successive term that it does not wish
to renew the Agreement for an additional term.
ii. Limitation. Notwithstanding those general rules,
the Board of Directors may terminate this Agreement as to Executive for good
cause (including but not limited to a diminution in Executive's duties and
responsibilities with Kaydon) during the original or a successive term, on 30
days advance written notice to Executive.
Notice of non-renewal or termination shall not be given, and
if given shall have no effect, and Board action to terminate the Agreement will
not be effective, however, within three years after a Change in Control or
during any period of time when Kaydon has reason to believe that any third
person has begun a tender or exchange offer, circulated a proxy to stockholders,
or taken other steps or formulated plans to effect a Change in Control. That
period of time ends when, in the opinion of the Board of Directors, the third
person has abandoned or terminated the efforts or plans to effect a Change in
Control.
7. Miscellaneous. In addition, the following terms govern.
a. Assignment. No right, benefit or interest under this
Agreement is subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt or
obligation, or to execution, attachment, levy or similar process. Executive may,
however, assign any right, benefit or interest under this Agreement if the
assignment is permitted under the terms of any plan or policy of insurance or
annuity contract governing such right, benefit or interest.
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b. Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of Kaydon other than as
specifically stated here.
i. Employment. This Agreement is not, and nothing
here shall be deemed to create, an employment contract between Executive and
Kaydon or any of its Subsidiaries. Executive acknowledges that the rights of
Kaydon and the Subsidiary employing Executive to change or reduce at any time
and from time to time Executive's compensation, title, responsibilities,
location and other aspects of the employment relationship or to discharge
Executive prior to a Change in Control shall remain wholly unaffected by the
provisions of this Agreement, except as explicitly limited in this Agreement.
ii. No Waiver. No waiver by either party to this
Agreement at any time of any breach by the other party to this Agreement, or
noncompliance with any condition or provision of this Agreement to be performed
by such other party, shall be deemed a waiver of that or of any other provision
or condition.
iii. Integration. This Agreement sets forth the
entire agreement of the parties on the subjects addressed here and no agreements
or representations express or implied on such subjects have been made by either
party which are not set forth expressly in this Agreement.
c. Amendment. Except as otherwise provided in this Agreement, this
Agreement may not be amended, modified or canceled except by written agreement
of the parties.
d. Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound.
e. Severability. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and effect to
the fullest extent permitted by law.
f. Successors. This Agreement shall be binding upon and inure to the
benefit of Executive and Executive's personal representative and heirs, and upon
Kaydon and any successor organization or organizations which shall succeed to
substantially all of the business and property of Kaydon whether by means of
merger, consolidation, acquisition of substantially all of the assets of Kaydon
or otherwise,
Including by operation of law. References here to duties and obligations of
Kaydon following a Change in Control are binding upon and shall be the joint and
several liability of Kaydon and any successor of it and all Subsidiaries of
Kaydon and any successors of any of them.
g. Taxes. Any payment or delivery required under this Agreement shall
be subject to all requirements of the law with regard to withholding of taxes,
filing, making of reports and the like. Kaydon shall use its best efforts to
satisfy promptly all such requirements.
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h. Payment. All amounts payable by or on behalf of Kaydon under this
Agreement shall, unless specifically stated to the contrary in this Agreement,
be paid in a lump sum in U.S. Dollars, without notice or demand, no later than
the first day of the second month following termination of Executive's
employment. Each and every payment made by or on behalf of Kaydon shall be final
and Kaydon and its subsidiaries shall not, for any reason whatsoever, seek to
recover all or any part of any payment from Executive or from whomever is
entitled to it.
i. Death. If Executive dies prior to the time all payments due to
Executive under this Agreement have been made, then as soon as practicable after
Executive's death (but in no event later than three months after), Kaydon shall
pay in a lump sum in U.S. Dollars all sums not paid to Executive prior to his
death. Payment shall be made to the beneficiary or beneficiaries (in addition to
the amount of life insurance proceeds payable to each beneficiary) named under
the life insurance plan or plans maintained by Kaydon on the date of Executive's
death. If no such beneficiary is named, such sums shall be paid to Executive's
estate. Except as provided in Subsection 2(b)(iii), no reduction to present
value of any such sums shall be made.
IN WITNESS, the parties have executed this Agreement as of the 12th day
of November, 2002.
KAYDON CORPORATION EXECUTIVE
By /s/ Xxxx X. Xxxxxx /s/ Xxxxx X. XxXxxxxx
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Its Secretary
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