EXHIBIT 10.5
KAYDON CORPORATION
DIRECTOR DEFERRED COMPENSATION PLAN
(Amended and Restated Effective October 25, 2007)
     1. Establishment of the Plan. Kaydon Corporation (“Corporation”) has
adopted this Director Deferred Compensation Plan for Directors (“Plan”)
effective January 1, 2001, to provide certain members of the Board of Directors
of the Corporation (“Board”) with the opportunity to defer all or a portion of
their fees for services as a member of the Board or as a member of any committee
of the Board (“Deferred Fees”). The Plan is hereby amended and restated
effective October 25, 2007 by Board action, in compliance with the provisions of
Section 13 hereof.
     2. Participation. Any member of the Board who is not an employee of the
Corporation or any of its affiliates (“Member”) may participate in the Plan.
     3. Plan Year. The Plan Year shall be the 12 consecutive month period
beginning on each January 1 and ending on each December 31 (“Plan Year”).
     4. Election to Participate. A Member wishing to participate in the Plan
must file a complete Notice of Election (Attachment A) with the Corporation
during the month prior to the start of the Plan Year. A Notice of Election shall
be effective only with respect to fees earned during the following Plan Year.
However, any individual who becomes a Member after January 1, 2001, may elect to
defer fees for the current Plan Year by filing a Notice of Election before
rendering any services and within 30 days after appointment to the Board. A
Notice of Election may not be modified or terminated after it is filed. A Member
must defer at least 25% of his or her total annual fees for Board membership and
at least 25% of his or her total annual fees for committee membership.
     5. Member Accounts. Deferred Fees shall be credited to a deferred
compensation account maintained by the Corporation for each Member (“Account”).
Accounts shall remain the general assets of the Corporation, and nothing in this
Plan shall be deemed to create a trust or fund of any kind or any fiduciary
relationship. A Member shall designate on the Notice of Election whether to have
the Account valued on the basis of Kaydon Corporation common stock in accordance
with Section 6 or to receive interest in accordance with Section 7. The
Corporation may, if necessary or desirable, establish separate Accounts for a
Member to properly account for amounts deferred under the different alternatives
and years; and all such Accounts are collectively referred to herein as the
Account. The Account based on Kaydon Corporation common stock shall be known as
the “Common Stock Account” and the interest bearing account shall be known as
the “Interest Bearing Account”. A Member may defer a portion of his or her
Deferred Fees into each type of account during the same Plan Year.
     6. Common Stock Account. If a Member elects to have all or a portion of his
or her Deferred Fees deferred into the Common Stock Account, as of the last
business day of any quarter there shall be credited to such Account a
hypothetical number of shares of Kaydon Corporation common stock (whole and
fractional, rounded to the nearest 1/100th of a share) as are equal to (a) the
dollar amount of such Deferred Fees payable for such quarter, plus all

 

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dividends payable during such quarter on the number of hypothetical shares of
common stock previously credited to the Account as of the first day of such
calendar quarter, divided by (b) the market value of the Kaydon Corporation
common stock at the close of business on the last business day of such calendar
quarter.
     7. Interest Bearing Account. If a Member elects to have all or a portion of
his or her Deferred Fees deferred in the Interest Bearing Account, there shall
be added to such Account as of the last business day of each calendar quarter
the dollar amount of such Deferred Fees payable for such calendar quarter plus
all interest payable on (a) the amount in the Account at the beginning of such
calendar quarter plus (b) the Deferred Fees payable for such quarter, at a rate
determined by the product of (1) the rate paid for twelve-month certificates of
deposit issued by a financial institution designated by the Corporation prior to
the beginning of the Plan Year, and (2) a fraction, the numerator of which is
the number of days in the calendar quarter and the denominator of which is 365.
     8. Time and Method of Payment. A Member may elect, on the Notice of
Election for a particular Plan Year, the date that the Member would like to
receive payment of the amounts held in his or her Account that relate to
Deferred Fees deferred during the Plan Year to which that Notice of Election
applies. The date elected may be any January 1st, provided that actual payment
may be made as soon as practicable after such date (but not more than thirty
(30) days thereafter, as determined by the Corporation in its sole discretion).
If no such election is made, then the amounts held in the Account that relate to
such Plan Year shall be paid on the January 1st following the Member’s
termination of Board membership by resignation, retirement or removal, or as
soon as practicable after such date (but not more than thirty (30) days
thereafter, as determined by the Corporation in its sole discretion).
     Amounts credited to and held in a Member’s Interest Bearing Account under
Section 7 and that relate to Deferred Fees deferred during a particular Plan
Year shall be distributed in cash, in accordance with the form of payment
elected by the Member on the Notice of Election for such Plan Year (lump sum or
annual installments of up to ten (10) years, with the first installment being
made on the date elected by the Member and later installments on the
anniversaries thereof). If no such election is made, then such amount shall be
paid in a cash lump sum.
     Amounts credited to and held in a Member’s Common Stock Account under
Section 6 may, at the election of the Member (to be made no later than thirty
(30) days before the date of distribution), be distributed either in a cash lump
sum or in fully taxable and freely transferable shares of Kaydon Corporation
common stock, provided that no fractional shares of such common stock shall be
issued, and any amounts held in such Account that represent a fractional share
of common stock shall be paid in a cash lump sum based on the fair market value
of the Corporation’s common stock at the close of business on the business day
prior to the date of payment to the Member. If the Member elects to receive his
or her Common Stock Account value in cash, the amount of the distribution shall
be equal to the product of the number of hypothetical shares of common stock
credited to the Account as of the end of the calendar quarter prior to the date
of distribution multiplied by the fair market value of the Corporation’s common
stock at the close of business on the business day prior to the date of payment
to the Member. If the Member elects to receive his or her Common Stock Account
value in common

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stock, the Corporation shall cause its stock transfer agent and registrar to
issue to the Member that number of shares of Kaydon Corporation common stock
equal to the number of hypothetical shares of common stock credited to the
Account as of the end of the calendar quarter prior to the date of distribution.
     Notwithstanding the above, the entire amount credited to a Member’s Account
shall be paid in a cash lump sum as soon as practicable after either of the
following (but not more than thirty (30) days thereafter, as determined by the
Corporation in its sole discretion): (a) the end of the quarter following the
Member’s termination of Board membership due to death or Disability, based on
the valuation as of such quarter-end; or (b) there shall have occurred a Change
in Control in the Corporation, as defined in Section 14, based on the valuation
as of the date of such Change in Control.
     9. Withdrawals upon Unforeseeable Emergency. Upon receipt of a Notice of
Unforeseeable Emergency (Attachment B) indicating that a Member has experienced
an unforeseeable emergency, the Corporation may authorize immediate cessation of
deferrals for the remainder of the Plan Year and/or a withdrawal from the
Member’s Account, as determined by the Corporation in its sole discretion based
on all the facts and circumstances and subject to the provisions of this
Section. The term “unforeseeable emergency” means: (a) a severe financial
hardship resulting from an illness or accident of the Member, or the Member’s
spouse, beneficiary under the Plan, or dependents (as defined in Internal
Revenue Code Section 152); (b) loss of the Member’s property due to casualty; or
(c) other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Member. The amount of the withdrawal
will be limited to the amount reasonably necessary to satisfy the emergency
need, which may include amounts necessary to pay any Federal, state, local or
foreign income taxes or penalties reasonably anticipated to result from the
distribution. Distribution may not be made to the extent that the emergency is
or may be relieved through reimbursement or compensation from insurance or
otherwise, or by liquidation of the Member’s assets (to the extent such
liquidation would not cause severe financial hardship), and must take into
account any additional compensation that is available from the cessation of
deferrals under the Plan. The Corporation may reasonably rely on the
representation of a Member regarding the availability of other financial
resources.
     10. Designation of Beneficiary. Each Member may file a Beneficiary
Designation (Attachment C) naming one or more beneficiaries to whom payment
shall be made in the event of the Member’s death. A beneficiary designation will
be effective only if it is filed with the Corporation during the Member’s
lifetime, and the latest beneficiary designation on file shall supersede all
other beneficiary designations. If a primary beneficiary or a contingent
beneficiary survives the Member but dies before receiving all amounts due
hereunder, the unpaid Account balance due to the beneficiary shall be paid in a
cash lump sum to the deceased beneficiary’s estate. If a primary beneficiary
predeceases the Member, then the beneficiary’s share shall be distributed to the
remaining primary beneficiaries on a pro rata basis. If all the primary
beneficiaries predecease the Member, the Member’s Account shall be paid to the
contingent beneficiary(ies). If a contingent beneficiary predeceases the Member,
then the beneficiary’s share shall be distributed to the remaining secondary
beneficiaries on a pro rata basis. If a Member fails to designate a beneficiary,
or if all designated beneficiaries shall predeceased the

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Member, the unpaid Account balance at the time of the Member’s death shall be
paid in one cash lump sum to the Member’s estate.
     11. Nonalienation of Benefits. Neither a Member nor any designated
beneficiary shall have any right to alienate, assign, or encumber any amount
that is or may be payable hereunder, or any right or interest that may be deemed
to exist hereunder. To the extent that any person acquires a right to receive
payments from the Corporation under the Plan, such right shall be no greater
than the right of any unsecured general creditor of the Corporation.
     12. Administration. Full power and authority to construe, interpret, and
administer the Plan shall be vested in the Corporation. Decisions of the
Corporation shall be final, conclusive, and binding upon all parties.
     13. Amendment and Termination. The Board may amend or terminate this Plan
at any time. Any amendment or termination of this Plan shall not affect the
rights of participants or beneficiaries to the amounts in each Account at the
time of such amendment or termination.
     14. Definitions. Wherever used herein, the following terms shall have their
respective meanings set forth below:
     “Change in Control” means the occurrence of any of the following events:
     (a) 50% Stock. The acquisition, by a person or Persons Acting as a Group,
of stock of the Corporation that together with stock held by such person or
group constitutes more than 50% of the total fair market value or total voting
power of the stock of Corporation;
     (b) 35% Stock. The acquisition, by a person or Persons Acting as a Group,
of ownership of stock of the Corporation that constitutes 35% or more of the
total voting power of Corporation’s stock in a single transaction or within a
twelve month period ending with the most recent acquisition;
     (c) Directors. The majority of members of the Board being replaced during
any twelve month period by directors whose appointment or election is not
endorsed by a majority of the members of the Board prior to the date of
appointment or election;
     (d) Assets. The acquisition, by a person or Persons Acting as a Group, of
the Corporation’s assets that have a total gross fair market value equal to or
exceeding forty percent (40%) of the total gross fair market value of
Corporation’s assets in a single transaction or within a twelve month period
ending with the most recent acquisition. For the purpose of this section, gross
fair market value means the value of the assets of the corporation, or the value
of the assets being disposed of, determined without regard to any liabilities
associated with such assets; or
     (e) Merger. A reorganization, merger or consolidation of the Corporation,
the substantive effect of which is a Change in Control under any of subsections
(a), (b), (c) or (d) above, unless with or into a Permitted Successor.

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     “Continuing Directors” are the individuals constituting the Board as of the
date this Amended and Restated Plan was adopted by the Board and any subsequent
directors whose election or nomination for election by the Corporation’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 Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board.
     “Disability” means the Non-Employee Director: (i) is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months; or (ii) is,
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for a
period of not less than 3 months under an accident and health plan covering
employees of the Corporation. To the extent required hereunder, the
determination of Disability shall be made by a medical board certified physician
selected by the Corporation and acceptable to the Non-Employee Director (or the
Non-Employee Director’s legal representative, if one has been appointed),
provided such agreement as to acceptability shall not be unreasonably withheld.
     “Employee Benefit Plan” means any plan or program established by the
Corporation or a Subsidiary for the compensation or benefit of employees of the
Corporation or any of its Subsidiaries.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     “Excluded Holder” means any Person who at the time this Amended and
Restated Plan was adopted by the Board was the beneficial owner of 20% or more
of the outstanding common stock of the Corporation; or the Corporation, a
Subsidiary or any Employee Benefit Plan of the Corporation or a Subsidiary or
any trust holding such common stock or other securities pursuant to the terms of
an Employee Benefit Plan.
     “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 Corporation’s
outstanding common stock and outstanding securities entitled to vote generally
in the election of directors (respectively) immediately prior to the applicable
transaction;

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     (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.
     “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2)
of the Exchange Act.
     “Persons Acting as a Group” means owners of a corporation that enters into
a merger, consolidation, purchase or acquisition of stock (or assets), 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 assets), or similar transaction, such
shareholder is considered to be acting as a group with other 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.
     “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 Corporation or by one or more Subsidiaries
of the Corporation.
     15. Law Governing. The provisions of this Plan shall be interpreted and
construed in accordance with the laws of the State of Michigan.

                  KAYDON CORPORATION    
 
  By:    /s/ John F. Brocci    
 
     
 
        Its:  V.P. Administration & Secretary    

Amended and Restated Effective: October 25, 2007

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ATTACHMENT A
NOTICE OF ELECTION
KAYDON CORPORATION
DIRECTOR DEFERRED COMPENSATION PLAN (“PLAN”)
     I elect to participate in the Plan for the year beginning January 1, 20___,
and ending December 31, 20___, as follows:
I. Amount of Deferred Fees
     I elect to defer the following percentages of my fees for year 20___.
(Check one box in each column):

                          Board of Directors Fees   Committee Fees
o
    25 %         o   25 %
o
    50 %         o   50 %
o
    75 %         o   75 %
o
    100 %         o   100 %

     I understand that this election is effective only for fees earned during
the year above, and that it may not be changed or revoked.
II. Valuation of Account
     I elect to have the year 20___deferred fees in my Account valued as
follows:

                     
 
  o 25%   o 50%   o 75%   o 100%   as invested in the Common Stock Account and
valued based on the value of Kaydon Corporation Common Stock
 
  o 25%   o 50%   o 75%   o 100%   as invested in the Interest Bearing Account
and valued based on the rate paid for 12-month certificates of deposit issued by
a financial institution designated by Kaydon Corporation on the preceding
January 1

III. Time of Payment
     I elect to receive, or begin to receive, my year 20___deferred fees on
(Check one and complete as indicated):

         
 
    o January 1, 20___; or
 
    o January 1 after my Board membership terminates due to resignation,
retirement or removal

NOTE: Payment may be made at any time during the 30 day period beginning on the
date indicated above, as determined by Kaydon Corporation in its sole
discretion.

 

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IV. Form of Payment
     My year 20___deferred fees credited to the Common Stock Account will be
paid in the form of fully taxable and freely transferable shares of Kaydon
Corporation Common Stock (subject to my election to receive a cash lump sum in
lieu of shares, to be made no later than 30 days before the date of
distribution).
     I elect to have my year 20___deferred fees invested in the Interest Bearing
Account to be paid as follows (Check one and complete as indicated):

         
 
  o   Lump sum; or
 
  o   Annual installments for ___ years (cannot be greater than 10 years), with
the first installment being made on the date indicated above and later
installments on the anniversaries thereof.

V. Acknowledgement and Signature
     I acknowledge that deferred fees remain the property of Kaydon Corporation.
I have read the Plan document and I understand that it alone governs all aspects
of the administration of deferred fees.
     Dated:                                          ,20___.

                                      Witness   Signature of Director    
 
               
VI.
  Acceptance            
 
                    Accepted on                      , 20__, by Kaydon
Corporation.    
 
               
 
      By:        
 
               

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ATTACHMENT B
NOTICE OF UNFORESEEABLE EMERGENCY
KAYDON CORPORATION
DIRECTOR DEFERRED COMPENSATION PLAN (“PLAN”)
TO: Kaydon Corporation
     I have experienced the “unforeseeable emergency” described below and I
request that you authorize the action requested below.

  I.   Description of Unforeseeable Emergency: (Describe the time and nature of
your emergency and the reason why the action requested is necessary to alleviate
your severe financial hardship. Use attachments if necessary).

     
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   

  II.   Action Requested. (Choose either or both and complete as indicated).

         
 
  o   Immediate cessation of deferrals (NOTE: this may be required)
 
  o   Payment(s) from my Account as follows (enter time and
 
  amount):    
 
       
 
             

             
 
           
 
 
 
Date  
 
                                   Signature of Director
 
 

(Do not write below this line)
 

             
 
  TO:        
 
     
 
   
 
  DATE:        
 
           

Your above request(s) is/are: o DENIED; o APPROVED, subject to the

             
 
  following:                  
 
                     

         
 
      KAYDON CORPORATION
 
  By:    
 
       
 
  Its:    
 
       

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ATTACHMENT C
BENEFICIARY DESIGNATION

KAYDON CORPORATION
DIRECTOR DEFERRED COMPENSATION PLAN (“PLAN”)
     This is the only form of Beneficiary Designation which will be recognized
under the Plan. This designation, when validly signed, dated and witnessed, will
control over any contrary designation in any will, trust, agreement, or other
instrument, whether executed before or after this form.

    Director’s Name: ______________ Date of Birth: _______________________    
Social Security No: ______________ Home Telephone: __________________     Street
Address: ___________________________________________________     City and State:
______________ Zip: _________________________________  

     Subject to the conditions below, I wish to revoke any previous Beneficiary
Designation of mine and to direct that, upon my death, any amount payable on my
behalf under the terms of the Plan shall be paid in a cash lump sum to the
Beneficiary(ies) designated below according to the indicated percentages:
     I. PRIMARY BENEFICIARY OR BENEFICIARIES

                                          Percentage (must Name   Relationship  
Address   Soc. Sec. No.   Date of Birth   total 100%)
 
                   

     If any one or more of the above-named Primary Beneficiaries is deceased or
not in existence at the time of my death, then each such Beneficiary’s share
shall be distributed to the remaining Primary Beneficiaries on a pro rata basis.
If none of the Primary Beneficiaries is living or in existence at the time of my
death, then any amount payable from the Plan on my behalf shall be paid to the
Contingent Beneficiary or Beneficiaries named below. If a Primary Beneficiary
survives me but dies before his or her entire share is distributed, then any
remaining balance shall be distributed to the estate of the Primary Beneficiary.

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     II. CONTINGENT BENEFICIARY OR BENEFICIARIES

                                                  Percentage (must Name  
Relationship     Address     Soc. Sec. No.     Date of Birth     total 100%)

     *If Beneficiary is a trust or estate, specify fiduciary name, address, tax
I.D. number, if any, and date of trust, if applicable.
     If one or more of the above-named Contingent Beneficiaries is deceased or
not in existence at the time of death, then each such Beneficiary’s share shall
be distributed to the remaining Contingent Beneficiaries on a pro rata basis. If
none of the Contingent Beneficiaries is living or in existence at the time of my
death, then any amount payable from the Plan on my behalf shall be paid in a
cash lump sum to my estate. If a Contingent Beneficiary survives me, but dies
before his or her entire share is distributed, then any remaining balance shall
be distributed to the estate of the Contingent Beneficiary.
     III. TERMS AND CONDITIONS
     1. This designation is subject to all the terms and conditions of the Plan
and shall be effective only if received prior to the date of my death by the
Plan Administrator. If it is not received prior to the date of my death, my
interest in the Plan shall be paid to my estate.
     2. This designation shall be effective with respect to my entire interest,
if any, under the Plan remaining unpaid to me or to any Beneficiary at my death
or the beneficiary’s death, as applicable.
     3. If a Beneficiary does not survive me or the prior Beneficiary, as
applicable, for thirty or more days, the Beneficiary will be presumed to have
predeceased me or the prior Beneficiary, as applicable.
     4. This designation shall be governed by Michigan law, regardless of my
current residence, my residence at the date of my death, the residence of any
Beneficiary, or the location of the Plan trustee or of the Plan assets.
     IV. DIRECTOR’S SIGNATURE

             
Date:
           
 
           
 
                        Signature of Witness (other than a   Address of Witness
    Beneficiary)        

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     V. RECEIVED ON BEHALF OF THE PLAN BY:
                                                             on
                                         , 20___.
*If Beneficiary is a trust or estate, specify fiduciary name, address, tax I.D.
number, if any, and date of trust, if applicable.