EXHIBIT 10.10
KAYDON CORPORATION
CHANGE IN CONTROL COMPENSATION AGREEMENT
AGREEMENT made and executed September 28, 1998 between KAYDON
CORPORATION, a Delaware corporation, 00000 X.X. 00 Xxxxx, Xxxxx Xxxxxxxxx Xxxxxx
Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000-0000 (Kaydon), and Xxxx X. Xxxxxx,
(the 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. Then 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 Executive's base salary for the calendar year in which the termination of
employment occurs or for the preceding calendar year; plus
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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 employment with the corporation or entity which succeeds Kaydon
after a Change in Control.
A. Management Incentive Compensation Plan.
This amount includes, but is not limited to, any award under the Kaydon
Management 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
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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 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 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;
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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
- 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.
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
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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.
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
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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
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 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.
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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
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.
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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.
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.
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6. Term of Agreement. Subject to Section 2 and the remainder of this
Section 6, this Agreement is effective on October 24, 1998 and shall terminate
on December 31, 1999.
i. Extension. This Agreement shall automatically
renew for successive one-year terms, each ending on the anniversary of December
31, 1999, 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.
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.
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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.
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.
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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 28th day
of September, 1998.
KAYDON CORPORATION EXECUTIVE
By /s/ Xxxx X. Xxxxxx /s/ Xxxx X. Xxxxxx
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Its VP ADMIN & SEC'TY Xxxx X. Xxxxxx
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