EMPLOYMENT AGREEMENT
Exhibit 10.1
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into on March 23, 2007, and is
effective on March 26, 2007 (the “Effective Date”), by and between KAYDON CORPORATION, a Delaware
corporation (the “Company”), and XXXXX X’XXXXX, an individual (“Executive”).
(a) The Company hereby agrees to employ Executive for the Term (as hereinafter defined) as its
President and Chief Executive Officer. The Executive shall have such management and oversight
responsibilities and authority as are necessary to efficiently administer the affairs of the
Company and as are customary of a President and Chief Executive Officer. All powers herein granted
to the Executive are subject to supervisory approval of the Board, and the Executive may be given
such further reasonably related supervisory duties, powers and prerogatives as may be delegated to
him from time to time by said Board. The Executive shall report exclusively to the Board and
further shall render such advice to the Board as said Board may from time to time request. In
addition, during the Term the Company will cause the Executive to be nominated for re-election as a
Director of the Company.
(b) During the Term, and excluding any periods of vacation and sick leave to which the
Executive is entitled, Executive shall devote substantially all of his business time and efforts to
the business and affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, use the Executive’s reasonable best efforts
to perform faithfully such responsibilities. Executive is required to work those business hours
customarily necessary to perform properly such duties and responsibilities normally associated with
the position of President and Chief Executive Officer. In performing such duties hereunder,
Executive shall comply with the policies and procedures as adopted from time to time by the Board,
shall give the Company the benefit of his special knowledge, skills, contacts and business
experience, shall perform his duties and carry out his responsibilities hereunder in a diligent
manner. For a transition period to extend no later than May 1, 2007, the Executive may provide
advisory services to Beazer Homes USA, Inc. so as to expedite and facilitate his full time
transition into the Company with the prior approval of the Board. Such advisory services shall not
unreasonably interfere with the services to be rendered by the Executive hereunder.
(c) During the Term, it shall not be a violation of this Agreement for the Executive to (i)
with the prior approval of the Board in each case (which approval shall not be unreasonably
withheld or delayed), serve on corporate, civic or charitable boards or committees, (ii) with the
prior approval of the Board in each case, deliver lectures, fulfill speaking engagements or teach
at educational institutions, and (iii) manage personal investments, so long as such activities
do not significantly interfere or constitute a conflict of interest with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with this Agreement.
(d) The principal location for performance of Executive’s services hereunder shall
be at the offices of the Company in Ann Arbor, Michigan, subject to reasonable travel requirements
during the course of such performance. Executive shall not be required, without his consent, to
regularly report to any office of the Company which is located more than fifty (50) miles from the
Company’s current office location, provided Executive shall be expected to travel to the extent
reasonably necessary to fulfill his responsibilities.
2. | Employment Term. The term of Executive’s employment hereunder (the “Term”) shall commence effective as of the date hereof and shall continue thereafter until terminated in accordance with Section 4 below. |
(i) in addition to any bonus to which the Executive would be entitled to under the
Company’s Executive Management Bonus Program (the “EMBP”), Executive shall be entitled to a
supplemental performance bonus equal to 40% of annual base salary in any year of the Term
during which the Company’s EBITDA performance achieves 100% of the Target EBITDA goal
established by the Compensation Committee pursuant to the EMBP, and a supplemental bonus
equal to 3% of annual base salary for each percentage that the Company’s EBITDA performance
exceeds the 114% of the Target EBITDA goal established by the Compensation Committee
pursuant to the EMBP, until the total of bonus payments equals 150% of the Executive’s
annual base salary. Anything contained herein to the contrary notwithstanding, in the event
that the EMBP is no longer in effect (or is reduced or modified downward in any material
respect), the Company will establish a comparable performance incentive plan that will
provide for annual cash bonuses to
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Executive resulting in total payments to Executive not less than those which Executive
is currently entitled to receive under this provision.
(ii) within ten (10) business days from the Effective Date, upon action by the
Compensation Committee, the Company shall grant Executive non-qualified stock options to
acquire 250,000 shares of common stock of the Company in accordance with the terms and
conditions of the Kaydon Corporation 1999 Long-Term Stock Incentive Plan (the “1999 Plan”).
The option agreement relating to such options shall provide that (A) such options shall vest
and become exercisable with respect to 50,000 shares on each anniversary of the date of
grant, subject to acceleration as provided in Sections 4(f)(v) and 5(e) below, (B) the
strike price for all such options shall be the closing price of the Company’s common stock
on the New York Stock Exchange on the date of grant and (C) such options shall expire on the
day prior to the tenth anniversary of the date of grant. In the event of any conflict
between the terms of the 1999 Plan and this Agreement, this Agreement shall govern and
control and shall be deemed to be an amendment to the 1999 Plan.
(iii) within ten (10) business days from the Effective Date, upon action by the
Compensation Committee, the Company shall grant Executive a restricted stock award for
100,000 shares of common stock of the Company in accordance with all of the terms and
conditions of the 1999 Plan. The agreement relating to such shares of restricted stock
shall provide that (A) the restrictions pertaining to such shares shall terminate with
respect to 20,000 shares on each anniversary of the date of grant, subject to acceleration
as provided in Sections 4(f)(v) and 5(e) below, and (B) so long as the Executive is employed
by the Company, the Executive shall be entitled to receive any dividends declared and
payable by the Company with respect to such restricted stock held by the Executive,
regardless of whether said stock has vested or become unrestricted at such time. In the
event of any conflict between the terms of the 1999 Plan and this Agreement, this Agreement
shall govern and control and shall be deemed to be an amendment to the 1999 Plan.
(iv) within ten (10) business days from the Effective Date, upon action by the
Compensation Committee, the Company shall grant Executive a restricted stock award for
10,000 shares of common stock of the Company in accordance with all of the terms and
conditions of the 1999 Plan. The agreement relating to such shares of restricted stock
shall provide that (A) the restrictions pertaining to such shares shall terminate on the
first anniversary of the date of grant, subject to acceleration as provided in Sections
4(f)(v) and 5(e) below and (B) so long as the Executive is employed by the Company, the
Executive shall be entitled to receive any dividends declared and payable by the Company
with respect to such restricted stock held by the Executive, regardless of whether said
stock has vested or become unrestricted at such time. In the event of any conflict between
the terms of the 1999 Plan and this Agreement, this Agreement shall govern and control and
shall be deemed to be an amendment to the 1999 Plan The Executive shall purchase an equal
number of shares of the Company’s common stock within thirty (30) days of the Effective Date
and shall retain ownership of at least 10,000 shares of Company common stock during the
Term.
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(c) Incentive, Savings and Retirement Plans. During the Term, the Executive shall be
entitled to participate in all incentive, savings and retirement plans, practices, policies and
programs (the “Programs”) applicable generally to other most senior executives of the Company and
its affiliated companies. The Programs currently include, without limitation, the Kaydon
Corporation Retirement Plan (the “Retirement Plan”), the Kaydon Corporation Supplemental Executive
Retirement Plan (the “SERP”) and the Kaydon Corporation Executive Management Bonus Plan (the “Bonus
Plan”). Notwithstanding the foregoing or anything contained in the applicable Programs to the
contrary, the Company agrees that, with respect to the Executive’s participation in the SERP, the
Executive shall be entitled to the following (and the SERP shall be amended, as of the Effective
Date, to provide for the following):
(i) the Executive shall be eligible for benefits under the SERP on the Effective Date
(i.e., for all purposes of the SERP, the Executive shall be deemed to be sixty-five (65)
years of age on the Effective Date) and the Executive shall remain a participant in the SERP
during the Term;
(ii) the Executive shall be 100% vested under the SERP on the Effective Date,
regardless of whether the Executive is vested under the Retirement Plan;
(iii) the Executive shall be entitled to a lump sum payment from the SERP upon the
termination of his employment with the Company following a Change in Control, said payment
to be made in cash and, subject to Section 11 below, within thirty (30) days following the
Date of Termination;
(iv) the Executive shall be entitled to ten (10) years of additional credited service
on the Effective Date and, thereafter, each day of the Executive’s actual credited service
shall entitle the Executive to one (1) day of additional credited service, subject to a
maximum of thirty (30) years of credited service. By way of example, after two years of
actual credited service with the Company, the Executive shall have fourteen (14) years of
credited service under the SERP (i.e., 10 + 2 + 2);
(v) the Executive shall be deemed to be a person identified in Appendix C to the SERP
as eligible for additional credited service; and
(vi) the definition of a “Change in Control” shall be as set forth in Section 5(j)
below .
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policies. Executive shall keep detailed and accurate records of expenses incurred in
connection with the performance of his duties hereunder and reimbursement therefore shall be in
accordance with policies and procedures to be established from time to time by the Board.
The Company warrants and represents to the Executive that this Agreement, including, without
limitation, the grants and amendments to the 1999 Plan and the SERP contemplated hereby, have been
duly authorized and approved by the Compensation Committee of the Board and the Board.
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4. Termination of Employment for Death or Disability; Other Termination Absent any Change in
Control.
(i) any act or failure to act by Executive done with the intent to harm in any material
respect the financial interests or reputation of the Company or any affiliated companies;
(ii) Executive being convicted of (or entering a plea of guilty or nolo contendere to)
a felony (other than a felony involving a motor vehicle not involving alcohol or drugs);
(iii) Executive’s dishonesty, misappropriation or fraud with regard to the Company or
any affiliated companies, including (but not limited to) any falsification of company
records or reports (other than good faith expense account disputes);
(iv) a grossly negligent act or failure to act by Executive which has a material
adverse affect on the Company or any affiliated companies;
(v) the material breach by Executive of his agreements or obligations under this
Agreement which has a material adverse effect on the Company, which breach, if curable, is
not cured by Executive within fifteen (15) days (i.e., calendar days) after written notice
from the Company which specifically identifies the material breach which the Company
believes that Executive has committed; or
(vi) the continued refusal to follow the directives of the Board or its designees which
are consistent with Executive’s duties and responsibilities identified in Section 1 hereof;
provided that the foregoing refusal shall not be “cause” if Executive in good faith believes
that such direction is illegal, unethical or immoral and promptly so notifies the Board in
writing.
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for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:
(i) the assignment to the Executive of any duties inconsistent in any material respect
with the Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section 1 of this
Agreement, or any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is remedied by the
Company within fifteen (15) days after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of Section 3 of
this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company within fifteen (15) days after receipt of
notice thereof given by the Executive;
(iii) the Company’s requiring the Executive to be based at any office or location other
than as provided in Section 1(e) hereof, which is not remedied by the Company within fifteen
(15) days after receipt of notice thereof given by the Executive; or
(iv) the material breach by the Company of any of its other material obligations under
this Agreement, which breach, if curable, is not cured by the Company within fifteen (15)
days after written notice from the Executive which specifically identifies the material
breach which the Executive believes that the Company has committed permitted by this
Agreement.
Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30 day period immediately preceding the twelve (12) month anniversary of a
Change in Control shall be deemed to be a termination for Good Reason for all purposes of this
Agreement.
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employment is terminated by the Company for Cause, or by the Executive for Good Reason, the
date of receipt of the Notice of Termination or, subject to applicable cure periods, any later date
specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the
Company other than for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive’s employment is
terminated by reason of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
(i) the Company shall pay to the Executive in a lump sum in cash, subject to Section 11
below, within thirty (30) days following the Date of Termination, or as soon thereafter as
is reasonably practicable, the aggregate of the following amounts: (1) the Executive’s
Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2)
any accrued but unpaid annual bonus (“Annual Bonus”) respecting any completed fiscal year
ending prior to the Date of Termination, (3) the product of (x) the Highest Annual Bonus
(hereinafter defined) and (y) a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator of which is 365
and (4) any compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the “Accrued Obligations”). The timing of payment by the Company
of any deferred compensation shall remain subject to any payment election previously made by
the Executive. The term “Highest Annual Bonus” shall mean the highest of the Executive’s
aggregate bonuses (whether paid or deferred) under all of the Company’s annual incentive
and/or bonus plans (including, without limitation, the Bonus Plan) during the last three
full fiscal years prior to the Date of Termination or for such lesser period as the
Executive has been employed by the Company (annualized in the event that the Executive was
not employed by the Company for the whole of any such fiscal year).
(ii) the Company shall pay to the Executive in a lump sum in cash, subject to Section
11 below, within thirty (30) days following the Date of Termination, or as soon thereafter
as is reasonably practicable, an amount equal to two (2) times the sum of (1) Executive’s
Annual Base Salary (at the rate in effect on the Date of Termination), and (2) the Highest
Annual Bonus;
(iii) for a period two (2) years after the Date of Termination, or such longer period
as may be provided by the terms of the appropriate plan, program, practice or policy, but
subject to applicable insurance company and other legal requirements, the Company shall
continue benefits to the Executive and/or the Executive’s family at least equal to those
which would have been provided to them in accordance with the plans, programs, practices and
policies described in Section 3(d) of this Agreement if the Executive’s employment had not
been terminated or, if more favorable to the Executive, as in effect generally at any time
within two (2) years thereafter with respect to other peer
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executives and their families; provided, however, that if the Executive becomes
reemployed with another employer and receives medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under the other employer-provided plan during the two
(2) year period referenced herein; notwithstanding the foregoing, if the Executive’s
benefits referenced herein or the level of coverage cannot be continued due to Internal
Revenue Service or insurance company restrictions, the Company shall provide the Executive
with such substantially equivalent benefits or such additional benefits as shall be
necessary to make the benefits to the Executive and/or the Executive’s family substantially
equivalent, even if the payment or coverage of such benefits shall be provided through other
sources; and
(iv) to the extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid or provided or
which the Executive is eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the “Other Benefits”).
(v) all stock options, restricted stock awards, long term incentive plan benefits and
any other benefits that are subject to vesting based upon the continued employment of the
Executive which would become vested, unrestricted or exercisable within the two (2) year
period immediately following the Date of Termination shall automatically become vested,
unrestricted and/or exercisable, as the case may be.
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payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid
to the Executive in a lump sum in cash, subject to Section 11 below, within thirty (30) days
following the Date of Termination, or as soon thereafter as is reasonably practicable.
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the Company and its affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed until three (3) years after
the Date of Termination and to have retired on the last day of such period.
If due to insurance company or Internal Revenue Service restrictions, the 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 or, if more favorable to the Executive, during the
three-year period thereafter, the Company shall provide such substantially equivalent benefits, or
such additional benefits as may be necessary to make the Executive whole through other sources.
(i) Accrued Benefit: In the event a Change in Control occurs, the Executive
shall be entitled to payment of the Actuarial Equivalent of the Executive’s vested Accrued
Benefit under the SERP, if any, adjusted as follows to the extent applicable to the
Executive:
A. Additional Credit. Executive’s benefit and Accrued Benefit under
the SERP shall be computed by crediting the Executive with the Additional Credit
provided in Section 2.17(a) of the SERP; and
B. Actuarial Equivalent. The Actuarial Equivalent of the payments from
the SERP determined under that Plan and this subsection shall be
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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.
(ii) Effect. The execution of this Agreement constitutes:
A. An amendment of the SERP with respect to Executive to effect the provisions
of this Agreement;
B. An agreement by Executive to the terms of, and consent in accordance with
Section 6.1(a) of the SERP to, the amended and restated SERP adopted by the
Board of Directors as of October 16, 2006, and to the amendments to the SERP
provided in this Agreement;
C. An agreement by the Company and Executive that Executive may not be removed
from the Additional Credit provisions of the SERP; and
D. An agreement by the Company and Executive that Executive’s employment with
any successor to the Company shall not cause forfeiture of Executive’s benefits
under the SERP under Section 3.6(a) of the SERP.
Payment of the SERP benefit as provided by this Agreement satisfies the Company’s
obligations to Executive, if any, under the SERP.
(iii) Limitation. Notwithstanding any other provision of this Agreement, this
subsection (h) does not provide any SERP benefit to Executive if Executive was not an Active
Participant in the SERP at any time within six (6) months prior to the Change in Control,
unless Executive was removed as an Active Participant in the SERP or the SERP was amended or
terminated within six (6) months prior to the Change in Control.
(i) “Act” means the Securities Exchange Act of 1934, as amended.
(ii) “Change in Control” means any one of the following:
A. The failure of the Continuing Directors at any time to constitute at least a
majority of the members of the Board;
B. The acquisition by any Person of beneficial ownership (within the meaning of
Rule 13d-3 issued under the Act) of 20% or more of the outstanding common stock of
the Company or the combined voting power of the Company’s outstanding securities
entitled to vote generally in the election of directors;
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C. The approval by the stockholders of the Company of a reorganization, merger
or consolidation, unless with or into a Permitted Successor; or
D. The approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company or the sale or disposition of all or substantially all
of its assets other than to a Permitted Successor.
(iii) “Continuing Directors” means those individuals constituting the Board as of the
Effective Date and any subsequent directors whose election or nomination for election by the
Company’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.
(iv) “Employee Benefit Plan” means any plan or program established by the Company or a
Subsidiary for the compensation or benefit of its employees.
(v) “Permitted Successor” means a corporation which, immediately following the
consummation of a Change in Control above, satisfies all of the following criteria:
A. 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 the Company’s outstanding common stock and outstanding
securities entitled to vote generally in the election of directors (respectively)
immediately prior to the applicable transaction;
B. No Person 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; and
C. At least a majority of the board of directors is comprised of Continuing
Directors.
(vi) “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended.
(vii) “Persons Acting as a Group” means owners of a corporation that enters into a
merger, consolidation, purchase or acquisition of stock, or similar business transaction
with the corporation. If a person, including an entity, owns stock in both corporations
that enter into a merger, consolidation, purchase or acquisition of stock, or similar
transaction, such shareholder is considered to be acting as a group with other
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shareholders in a corporation prior to the transaction giving rise to the change and
not with respect to the ownership interest in the other corporation. Persons will not be
considered to be acting as a group solely because they purchase or own stock of the same
corporation at the same time or as a result of the same public offering, or purchase assets
of the same corporation at the same time.
(viii) “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 the Company or by one or more Subsidiaries of the Company.
6. Indemnification. The Company agrees to indemnify the Executive to the fullest extent
provided by Article VI of the Company’s Bylaws, as in effect on the Effective Date, regardless of
whether such Bylaw provisions are hereafter amended, eliminated or held to be invalid as a matter
of Delaware law. The Company’s indemnification obligations shall survive the expiration or
termination of the Term for any reason.
(i) directly or indirectly (A) induce any current customer of the Company to patronize
any business directly or indirectly in competition with the Business conducted by the
Company; (B) request or advise any of the current customers to withdraw, curtail or cancel
any business with the Company; or
(ii) directly or indirectly employ any person who was employed by the Company at or
within the prior six months, or in any manner seek to induce any such person to leave his or
her employment; provided, that, the Executive may hire an employee of the Company or any of
its affiliates who was terminated by the Company or resigned from employment with the
Company so long as the Executive did not directly or indirectly influence such termination
or resignation.
The Executive acknowledges that in the event of his breach of the foregoing covenant, money damages
would be an inadequate remedy. Accordingly, and notwithstanding any other provision of this
Agreement, without prejudice to the rights of the Company to seek such damages or other remedies
available to it, the Company shall be entitled to seek injunctive relief, specific performance or
other equitable relief in any proceeding which the Company may bring to enforce the foregoing
covenant not to compete on its express and explicit terms without the necessity of posting a bond.
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Information or take with him upon termination of this Agreement any records, papers, reports,
lists, computer tapes or disks or any other materials of any nature that contain any Confidential
Information. “Confidential Information” shall mean all information other than General Knowledge
(defined below) relating to the Company’s: (i) business or existing projects including all those in
various stages of research and development including all unpublished plans for new products or
services; (ii) financial information, internal business procedures and other information which
relate to the way the Company conducts its business and which are not publicly available; (iii)
data written by the Company’s employees or others, including source codes, object codes, marketing
and development plans, budgets, forecasts, forecast assumptions and future plans and potential
strategies of the Company which have been or are being discussed; (iv) unpublished pricing data;
(v) identity, buying habits and practices of the Company, its suppliers and customers to the extent
not publicly available; (vi) information regarding the skills or compensation of employees of the
Company; (vii) the Intellectual Property of the Company and any information pertaining thereto;
(viii) materials and information supplied by customers or clients to the Company that contain data
regarding any research, products, procedures or the like; and (ix) any other information deemed
confidential by the Company by marking such information with the word “Confidential” or similar
word; by orally advising the Executive that the information is confidential or by treating the
information in such a manner that the Executive should reasonably believe it to be deemed
confidential by the Company. “General Knowledge” shall mean (i) general skills or experience
gained during Executive’s employment with, consultation for or work for the Company; and (ii)
information and data publicly available.
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8. Mitigation. Except as otherwise provided in this Agreement pertaining to medical and
other welfare benefits, in no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by
law, all reasonable legal fees and expenses which the Executive may reasonably incur as a result of
any contest by (i) the Company, provided that the Executive prevails in at least one material
issue, (ii) the Executive, provided that the Executive prevails in at least one material issue, or
(iii) others, of the validity or enforceability of, or liability under, any provision of this
Agreement (including, without limitation, as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the “Code”).
9. Successors.
(a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns. The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no such succession had
taken place, and the failure of the Company to do so shall be deemed Good Reason. As used in this
Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation
of law, or otherwise.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State
of Delaware, without reference to principles of conflict of laws. Any legal action, suit or
proceeding arising out of or relating to this Agreement shall be instituted in the state or federal
courts in the States of either Michigan or Delaware, and the parties agree not to assert, in any
action, suit or proceeding by way of motion, as a defense or otherwise, any claim that either party
is not personally subject to the jurisdiction of such court, or that such action, suit or
proceeding is brought in an inconvenient forum, or that the venue is improper or that the subject
matter hereof cannot be enforced in such court. The parties hereby irrevocably submit to the
jurisdiction of any such court in any such action, suit or proceeding and agree that service of all
process in any such action, suit or proceeding in any such court may be made by registered or
certified mail, return receipt requested, to its address set forth in this Agreement, such service
being hereby acknowledged by such party to be sufficient for personal jurisdiction in any action
against such party in any such court and to be otherwise effective and binding service in every
respect.
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(b) The captions of this Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and legal representatives.
(c) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other party, by commercial overnight courier or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Xxxxx X’Xxxxx
c/x Xxxxxxxxx, Xxxxxx & Xxxxxx, LLC
0 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
c/x Xxxxxxxxx, Xxxxxx & Xxxxxx, LLC
0 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
If to the Company:
Kaydon Corporation
000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Vice President-Administration
000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Vice President-Administration
or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.
(e) The Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
(f) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to terminate employment
for Good Reason pursuant to Section 4(c) of this Agreement, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.
(g) This Agreement supersedes any and all other prior or contemporaneous agreements, either
oral or in writing, between the parties hereto with respect to the subject matter hereof. This
Agreement may be executed via facsimile transmission signature and in counterparts, each of which
shall be deemed to be an original but all of which together will constitute one and the same
instrument.
11. Special Rules Regarding Section 409A of the Internal Revenue Code. Notwithstanding
anything herein to the contrary, in the event any payments or benefits required to be provided
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hereunder are deemed to constitute payments of “nonqualified deferred compensation” that is subject
to the requirements of Section 409A of the Internal Revenue Code, then the time and manner in which
such payment or benefit is provided shall be adjusted, to the extent reasonably possible, so that
payment or distribution is made at a time and in a manner that is consistent with the requirements
of such Section 409A (and applicable proposed or final Treasury regulations or other guidance
issued or to be issued by the Internal Revenue Service). This Section 11 may, for example, require
that certain payments to Executive following his termination of employment be accumulated and
deferred without interest until the first day of the seventh month following the Date of
Termination, if, at the Date of Termination Executive was a “specified employee” (as that term is
used for purposes of Section 409A(2)(B)(i)).
(i) such Covered Payments will be treated as “parachute payments” (within the meaning
of Section 280G(b)(2) of the Code) and such payments in excess of the Code
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Section 280G(b)(3) “base amount” shall be treated as subject to the Excise Tax, unless,
and except to the extent that, the Company’s independent certified public accountants
appointed prior to the change in ownership covered by Code Section 280G(b)(2) or legal
counsel (reasonably acceptable to Executive) appointed by such public accountants (the
“Accountant”), deliver a written opinion to Executive, reasonably satisfactory to
Executive’s legal counsel, that Executive has a reasonable basis to claim that the Covered
Payments (in whole or in part) (A) do not constitute “parachute payments”, (B) represent
reasonable compensation for services actually rendered (within the meaning of Section
280G(b)(4) of the Code) in excess of the “base amount” allocable to such reasonable
compensation, or (C) such “parachute payments” are otherwise not subject to such Excise Tax
(with appropriate legal authority, detailed analysis and explanation provided therein by the
Accountants); and
(ii) the value of any Covered Payments which are non-cash benefits or deferred payments
or benefits shall be determined by the Accountant in accordance with the principles of
Section 280G of the Code.
(i) to pay federal, state and/or local income taxes at the highest applicable marginal
rate of income taxation for the calendar year in which the Tax Reimbursement Payment is made
or is to be made; and
(ii) to have otherwise allowable deductions for federal, state and local income tax
purposes at least equal to those disallowed due to the inclusion of the Tax Reimbursement
Payment in Executive’s adjusted gross income.
(i) (A) In the event that prior to the time Executive has filed any of his tax returns
for the calendar year in which the change in ownership event covered by Code Section
280G(b)(2) occurred, the Accountant determines, for any reason whatever, the correct amount
of the Tax Reimbursement Payment to be less than the amount determined at the time the Tax
Reimbursement Payment was made, Executive shall repay to the Company, at the time that the
amount of such reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction (including the
portion of the Tax Reimbursement Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the portion of the Tax Reimbursement Payment being repaid by
Executive, using the assumptions and methodology utilized to calculate the Tax Reimbursement
Payment (unless manifestly erroneous)), plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is made by the
Accountant after the filing by Executive of any of his tax returns for the calendar year in
which the change in ownership event covered by Code Section 280G(b)(2)
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occurred but prior to one (1) year after the occurrence of such change in ownership,
Executive shall file at the request of the Company an amended tax return in accordance with
the Accountant’s determination, but no portion of the Tax Reimbursement Payment shall be
required to be refunded to the Company until actual refund or credit of such portion has
been made to Executive, and interest payable to the Company shall not exceed the interest
received or credited to Executive by such tax authority for the period it held such portion
(less any tax Executive must pay on such interest and which he is unable to deduct as a
result of payment of the refund).
(C) In the event Executive receives a refund pursuant to (B) above and repays such
amount to the Company, Executive shall thereafter file for refunds or credits by reason of
the repayments to the Company.
(D) Executive and the Company shall mutually agree upon the course of action, if any,
to be pursued (which shall be at the expense of the Company if Executive’s claim for refund
or credit is denied.
(ii) In the event that the Excise Tax is later determined by the Accountants or the
Internal Revenue Service to exceed the amount taken into account hereunder at the time the
Tax Reimbursement Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Tax Reimbursement Payment), the
Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus
any interest or penalties payable with respect to such excess) once the amount of such
excess is finally determined.
(iii) In the event of any controversy with the Internal Revenue Service (or other
taxing authority) under this Section 12, subject to subpart (d)(i)(D) above, Executive shall
permit the Company to control issues related to this Section 12 (at its expense), provided
that such issues do not potentially materially adversely affect Executive, but Executive
shall control any other issues. In the event the issues are interrelated, Executive and the
Company shall in good faith cooperate so as not to jeopardize resolution of either issue,
but if the parties cannot agree Executive shall make the final determination with regard to
the issues. In the event of any conference with any taxing authority as to the Excise Tax
or associated income taxes, Executive shall permit the representative of the Company to
accompany him and Executive and his representative shall cooperate with the Company and its
representative.
(iv) With regard to any initial filing for a refund or any other action required
pursuant to this Section 12 (other than by mutual agreement) or, if not required, agreed to
by the Company and Executive, Executive shall cooperate fully with the Company, provided
that the foregoing shall not apply to actions that are provided herein to be at the sole
discretion of Executive.
(e) Time of Payment. The Tax Reimbursement Payment, or any portion thereof, payable
by the Company shall be paid not later than the fifth (5th) day following the determination by the
Accountant, and any payment made after such fifth (5th) day shall bear interest at the rate
provided in Code Section 1274(b)(2)(B). The Company shall use its best
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efforts to cause the Accountant to promptly deliver the initial determination required
hereunder and, if not delivered, within ninety (90) days after the change in ownership event
covered by Section 280G(b)(2) of the Code, the Company shall pay Executive the Tax Reimbursement
Payment set forth in an opinion from counsel recognized as knowledgeable in the relevant areas
selected by Executive, and reasonably acceptable to the Company, within five (5) days after
delivery of such opinion. The amount of such payment shall be subject to later adjustment in
accordance with the determination of the Accountant as provided herein.
KAYDON CORPORATION |
||||
By: | /S/ XXXX X. XXXXXX | |||
Name: Xxxx X. Xxxxxx | ||||
Title: Vice President Administration and Secretary | ||||
EXECUTIVE: /S/ XXXXX X’XXXXX XXXXX X’XXXXX |
||||
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