exv10w1



 






Exhibit 10.1




KAYDON CORPORATION




EXECUTIVE MANAGEMENT BONUS PROGRAM




     1.      Definitions. The following terms have the meanings indicated unless a different
meaning is clearly required by the context:



     “Approval Date” means March 2, 2005, which is the date on which this Bonus Plan was approved
by the Board of Directors of the Company.



     “Bonus Plan” means this Kaydon Corporation Executive Bonus Program, as amended from time to
time.



     “Cause” means a determination by the Company that a Participant has committed a fraud or
felony, engaged in deliberate, willful or gross misconduct, or in conduct detrimental to the
Company team effort, or was insubordinate, or performed in an overall unacceptable manner, or
violated the policies of the Company as may be established by the Company from time-to-time, or
committed an act of moral turpitude, or committed any other act that causes or may reasonably be
expected to cause substantial injury to the Company or to its reputation.



     “Change in Control” means (i) the failure of the Continuing Directors at any time to
constitute at least a majority of the Board of Directors of the Company, (ii) the acquisition by
any Person other than an Excluded Holder of beneficial ownership (within the meaning of Rule 13d-3
issued under the Securities Exchange Act of 1934, as amended) of 20% or more of the outstanding
Common Stock of the Company or the combined voting power of the Company’s outstanding voting
securities, (iii) the approval by the stockholders of the Company of a reorganization, merger or
consolidation unless with a Permitted Successor, or (iv) the approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company or a sale or disposition of all or
substantially all of its assets other than to a Permitted Successor.



     “Committee” means the Compensation Committee of the Company’s Board of Directors, each of the
members of which is a “non-employee director” within the meaning of Rule 16b-3.



     “Company” means Kaydon Corporation and any of its wholly-owned subsidiaries or affiliates.



     “Continuing Directors” means the individuals constituting the Board of Directors of the
Company on the Approval Date, and any subsequent directors whose election or nomination for
election was approved by a vote of 2/3 or more 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 or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors
of the Company.



     “Excluded Holder” means any Person who on the Approval Date was the beneficial owner of 20% or
more of the outstanding Common Stock of the Company, a subsidiary of the Company, any employee
benefit plan of the Company or any subsidiary of the Company or any trust holding such Common Stock
pursuant to the terms of an employee benefit plan of the Company.



 









 





     “Executive Officer” means Brian P. Campbell, John F. Brocci, Kenneth W. Crawford, Peter C.
DeChants, John R. Emling, John A. Madison and such other senior executive officers of the Company
as the Committee shall designate from time to time.



     “Good Reason” means (a) the assignment of a Participant to any duties or responsibilities that
are a reduction of, or are materially inconsistent with, the Participant’s position, duties,
responsibilities or status on the Approval Date, (b) a change in a Participant’s reporting
responsibilities or titles in effect on the Approval Date that results in a reduction of the
Participant’s responsibilities or position, (c) the reduction of a Participant’s annual salary,
level of benefits (except for a reduction uniformly applicable to all similarly situated
executives), projected Supplemental Executive Retirement Plan benefits, or (d) transfer of the
Participant to a location more than forty (40) miles from the Participant’s location of employment
on the Approval Date which requires a change in residence or a material increase in the amount of
travel normally required of the Participant in connection with his employment.



     “Permitted Successor” means a corporation that immediately after the consummation of a
transaction described in the definition of “Change in Control” satisfies all of the following
criteria: (a) at least 60% of the voting securities of such corporation is beneficially owned by
Persons who were the beneficial owners of the Company’s Common Stock immediately prior to such
transaction, (b) no Person other than an Excluded Holder beneficially owns, directly or indirectly,
20% or more of the outstanding voting securities of such corporation and (c) at least a majority of
the Board of Directors of such corporation is comprised of Continuing Directors.



     “Person” means a natural person, corporation, partnership, limited liability company,
government or political subdivision, agency or instrumentality of a government.



     2.      Purpose. The purpose of this Bonus Plan is to provide annual incentives to certain
senior executive officers in a manner designed to reinforce the Company’s performance goals; to
link a significant portion of participants’ compensation to the achievement of such goals; and to
continue to attract, motivate and retain key executives on a competitive basis.



     3.      Participation. Participants in this Bonus Plan are those Executive Officers who
are designated by the Committee to participate from time to time. The Committee shall also
determine the effective date of a Participant’s participation in this Bonus Plan. Each Participant
shall execute an Agreement annually, a form of which is attached hereto as Exhibit A, acknowledging
his willingness to participate in this Bonus Plan and agreeing to preserve corporate opportunity
with the Company for a period ending two years following receipt of the last bonus payment made
pursuant to this Bonus Plan. The Company may modify and amend the Agreement at its discretion
prior to each Bonus Plan year.



     4.      Performance Metric and Adjustments. The metric, or benchmark, against which
Company performance shall be measured for purposes of determining whether bonuses shall be awarded
to Participants, and the amount of such bonuses, shall be earnings before interest, taxes,
depreciation and amortization (“EBITDA”) from continuing operations.




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     5.      Performance Objective. The performance objective for each year will be Target
EBITDA, which shall be determined by the Committee each year at a regular Board of Directors
meeting occurring prior to the 90th day of the year for which Target EBITDA is to be
determined. In conjunction with, or promptly after, the presentation of the annual budget for the
following year, management will present to the Committee a recommended Target EBITDA for the
following fiscal year. The Committee shall evaluate the recommended Target EBITDA and Budget and
may determine the final Target EBITDA utilizing this information and any additional information
that it deems relevant.



     6.      Bonus Calculations. Participant bonuses shall be based on the level of EBITDA
achieved for the fiscal year, compared to Target EBITDA for that year, in accordance with the
following:




     (a) No Bonus payout shall be made if EBITDA achieved is equal to or less than 80% of
Target EBITDA;




     (b) Bonus payments will equal 3% of base salary for each Participant for each 1% that
EBITDA achieved for the year exceeds 80% of Target EBITDA, up to 114% of Target EBITDA. An
example would be:




	 	(a)  	if EBITDA is 83% of Target EBITDA, the bonus will be 9%
of a Participant’s base salary;
	 
	 	(b)  	if EBITDA is 100% of Target EBITDA, the bonus will be
60% of a Participant’s base salary; and
	 
	 	(c)  	if EBITDA is 109% of Target EBITDA, the bonus will be
87% of a Participant’s base salary.






     (c) A Participant’s bonus may not exceed 100% of the Participant’s base salary.



     7.      Discretionary Bonus Payments. In addition, at the discretion of the Committee, a
discretionary cash bonus may be paid to any Participant in an amount up to 25% of base salary that
shall be in addition to, or in lieu of, the bonus payment, if any, determined pursuant to Section
6.



     8.      Payment of Bonus Awards.




     (a) Conditions for Payment After Termination of Employment. If a Participant’s
employment with the Company terminates, the following provisions shall apply:




          (i) Termination for Cause. If a Participant’s employment is terminated
by the Company for Cause, no bonus shall be paid to the former Participant for any
period prior to the date of termination.




          (ii) Termination by Participant. If a Participant terminates his or
her employment without Good Reason, no bonus shall be paid to the former Participant
for any period prior to the date of termination.



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          (iii) Termination Following Death, Disability or Retirement. If a
Participant’s employment is terminated due to a Participant’s death, disability or
retirement at the normal retirement age prior to payment of a bonus award, such
bonus shall be paid (A) in the event of death, to the designated beneficiary of the
Participant or, if no beneficiary shall have been designated, the representative of
the Participant’s estate and (B) in the event of disability or retirement, to the
former Participant, and if termination occurs during a fiscal year, the amount of
bonus award shall be pro rated for that year based on the number of days worked
prior to termination of employment.




          (iv) Termination without Cause or for Good Reason, etc. If a
Participant’s employment is terminated without Cause, or the Participant terminates
his or her employment for Good Reason following a Change in Control and prior to the
payment of a bonus award, the Company shall nevertheless pay such bonus to the
terminated Participant. If termination occurs during a fiscal year, the amount of
bonus award shall be pro rated for that year based on the number of days worked
prior to termination of employment.




     (b) Change in Control Payment. In the event of a Change in Control of the
Company, a bonus for the year in which the Change in Control occurs, together with any
unpaid bonus from the preceding year, shall be immediately payable on the date of the Change
in Control. Such bonus shall be equal to 100% of a Participant’s base salary for the year
in which a Change in Control occurs.



     9.      Administrative Provisions. This Bonus Plan shall be administered by the Committee.
The Committee shall have full, exclusive and final authority in all determinations and decisions
affecting this Bonus Plan and Participants, including sole authority to interpret and construe any
provision of this Bonus Plan, to adopt such rules and regulations for administering this Bonus Plan
as it may deem necessary or appropriate under the circumstances, and to make any other
determination it deems necessary or appropriate for the administration of this Bonus Plan.
Decisions of the Committee shall be final and conclusive, and binding on all parties. All expenses
of administering this Bonus Plan shall be borne by the Company. No member of the Committee shall
be liable for any action, omission, or determination relating to this Bonus Plan, and the Company
shall indemnify and hold harmless each member of the Committee and each other director or employee
of the Company or its affiliates to whom any duty or power relating to the administration or
interpretation of this Bonus Plan has been delegated against any cost or expense (including counsel
fees, which fees shall be paid as incurred) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of or in connection with any action, omission
or determination relating to this Bonus Plan, unless, in each case, such action, omission or
determination was taken or made by such member, director or employee in bad faith and without
reasonable belief that it was in the best interests of the Company.



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     10.      Miscellaneous.




     (a) This Bonus Plan was adopted by the Board of Directors on the Approval Date and will
be effective commencing with bonuses payable in respect of the Company’s fiscal year ending
December 31, 2005.




     (b) The Board of Directors may at any time amend this Bonus Plan in any fashion or
terminate or suspend this Bonus Plan, provided that no such action shall adversely affect a
Participant’s rights under this Bonus Plan with respect to bonus arrangements agreed to by
the Company and the Participant, pursuant to a written agreement or otherwise, before the
date of such action, without the consent of the Participant.




     (c) This Bonus Plan shall be governed by and construed in accordance with the internal
laws of the State of Michigan applicable to contracts made, and to be wholly performed,
within such State, without regard to principles of choice of laws.




     (d) All amounts required to be paid under this Bonus Plan shall be subject to any
required Federal, state, local and other applicable withholdings or deductions.




     (e) Nothing contained in this Bonus Plan shall confer upon any Participant or any other
person any right with respect to the continuation of employment by the Company or interfere
in any way with the right of the Company at any time to terminate such employment or to
increase or decrease the compensation payable to the Participant from the rate in effect at
the commencement of a fiscal year or to otherwise modify the terms of such Participant’s
employment. No person shall have any claim or right to participate in or receive any award
under this Bonus Plan for any particular fiscal year or any part thereof.




     (f) The Company’s obligation to pay a Participant any amounts under this Bonus Plan
shall be subject to setoff, counterclaim or recoupment of amounts owed by a Participant to
the Company.




     (g) The right of a Participant or of any other person to any payment under this Bonus
Plan shall not be assigned, transferred, pledged or encumbered in any manner, and any
attempted assignment, transfer, pledge or encumbrance shall be null and void and of no force
or effect.



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AGREEMENT




     This Agreement (the “Agreement”) is made as of ___, 20___, by and between KAYDON
CORPORATION, a Delaware corporation (the “Company”), and ___(the “Executive”). The
Executive is a Participant in the Company’s ___ Cash Bonus Plan (the “Bonus Plan”) and is eligible to
receive a cash bonus award(s) under the Bonus Plan provided that the performance targets
established under the Bonus Plan are achieved. It is a condition of the Executive’s eligibility to
participate in the Bonus Plan that this Agreement be entered into annually and to protect and
preserve the Company’s existing and future business relationships and corporate opportunities.



     *Capitalized terms not expressly defined in this Agreement shall have the meanings ascribed to
them in the Bonus Plan. The parties, intending to be legally bound, agree as follows:



     1.      Non-Disclosure of Confidential Information. The Executive agrees not to disclose
to any unauthorized Persons or use for his own account or for the benefit of any third party any
Confidential Information, whether or not such information is embodied in writing or other physical
form or is retained in the memory of the Executive, without the Company’s written consent, unless
and only to the extent that the Confidential Information is or becomes generally known to and
available for use by the public other than as a result of the Executive’s fault or the fault of any
other Person bound by a duty of confidentiality to the Company.



     As used herein, “Confidential Information” includes: (a) any and all trade secrets concerning
the business and affairs of the Company, its subsidiaries and affiliates, product specifications,
data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, inventions and ideas, past, current and planned research and development,
current and planned manufacturing and distribution methods and processes, customer lists, current
and anticipated customer requirements, price lists, market studies, business plans, computer
software and programs (including object code and source code), database technologies, and similar
systems of the Company, its subsidiaries and affiliates; (b) any and all information concerning the
business and affairs of the Company, its subsidiaries and affiliates (which includes historical
financial statements, financial projections and budgets, historical and projected sales, capital
spending budgets and plans, the names and backgrounds of key personnel, contractors, agents,
suppliers and potential suppliers, personnel training and techniques and materials, and purchasing
methods and techniques, however documented); and (c) any and all notes, analysis, compilations,
studies, summaries and other material prepared by or for the Company, its subsidiaries and
affiliates containing or based, in whole or in part, upon any information included in the
foregoing.



     2.      Non-Competition and Non-Solicitation. As an inducement for the Company to permit
the Executive to participate in the Bonus Plan, the Executive agrees that for a period of two years
after the receipt of the last payment of a bonus award under the Bonus Plan:




     (a) The Executive will not, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management, operation, financing
or control of, be employed by, associated with or in any manner connected with, or render
services or advice or other aid to, or guarantee any obligation of, any



 









 






Person engaged in or planning to become engaged in a business whose products or
activities compete in whole or in part with the business conducted by the Company, its
subsidiaries or its affiliates at the time of receipt by the Executive of such last bonus
payment; provided, however, that the Executive may purchase or otherwise acquire up to (but
not more than) two percent (2%) of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such securities are listed
on any national or regional securities exchange or have been registered under Section 12(g)
of the Securities Exchange Act of 1934. Seller and each Shareholder agree that this covenant
is reasonable with respect to its duration, geographical area and scope.




     (b) The Executive will not, directly or indirectly, (A) induce or attempt to induce any
employee of the Company, its subsidiaries or its affiliates to leave his or her employment;
(B) in any way interfere with the relationship between the Company, its subsidiaries or its
affiliates and any such employee; (C) employ or otherwise engage as an employee, independent
contractor or otherwise any employee of the Company, its subsidiaries or its affiliates; or
(D) induce or attempt to induce any customer, supplier, licensee or other Person to cease
doing business with the Company, its subsidiaries or its affiliates or in any way interfere
with the relationship between any such customer, supplier, licensee or other business
entity.




     (c) The Executive will not, directly or indirectly, solicit the business of any Person
known to be a customer of the Company, its subsidiaries or its affiliates, whether or not
the Executive had personal contact with such Person, with respect to products or activities
which compete in whole or in part with the business operated by the Company, its
subsidiaries or its affiliates.




     (d) The Executive will not disparage the Company, its subsidiaries or its affiliates or
the business conducted by any of them or any shareholder, director, officer, employee or
agent of the Company, its subsidiaries or its affiliates.



     3.      Arbitration. The Executive and the Company agree that any disagreement dispute,
controversy, or claim arising out of or relating to this Agreement, its interpretation, or
validity, or the terms and conditions of the Executive’s employment (including but not limited to
the termination of that employment), will be settled exclusively and finally by arbitration
irrespective of its magnitude, the amount in controversy, or the nature of the relief sought. The
arbitration shall be conducted in accordance with the Employment Arbitration Rules (the
“Arbitration Rules”) of the American Arbitration Association (the “AAA”) (the terms of which then
in effect are incorporated here). The arbitral tribunal shall consist of one arbitrator skilled in
arbitration of executive employment matters. The parties to the arbitration shall jointly directly
appoint the arbitrator within thirty (30) days of initiation of the arbitration. If the parties
fail to appoint the arbitrator as provided above, the arbitrator shall be appointed by the AAA as
provided in the Arbitration Rules and shall be a person who has had substantial experience in
executive employment matters. The Company shall pay all of the fees, if any, and expenses of the
arbitrator and the arbitration. The arbitration shall be conducted in the Southeastern Michigan
area or in such other city in the United States of America as the parties to the dispute may
designate by mutual written consent. At any oral hearing of evidence in connection with the
arbitration, each party or its legal counsel shall have the right to examine its witnesses and to



 









 




cross-examine the witnesses of any opposing party. No evidence of any witness may be
presented in any form unless the opposing party or parties has the opportunity to cross-examine the
witness, except under extraordinary circumstances where the arbitrator determines that the
interests of justice require a different procedure. Any decision or award of the arbitrator shall
be final and binding upon the parties to the arbitration proceeding. The parties agree that the
arbitral award may be enforced against the parties to the arbitration proceeding or their assets
wherever they may be found and that a judgment upon the arbitral award may be entered in any court
having jurisdiction. Nothing contained here shall be deemed to give the arbitral tribunal any
authority, power, or right to alter, change, amend, modify, add to, or subtract from any of the
provisions of this Agreement. The provisions of this Section shall survive the termination or
expiration of this Agreement, shall be binding upon the Company’s and the Executive’s respective
successors, heirs, personal representatives, designated beneficiaries and any other person
asserting a claim described above, and may not be modified without the consent of the Company. To
the extent arbitration is required, no person asserting a claim has the right to resort to any
federal, state or local court or administrative agency concerning the claim unless expressly
provided by federal statute, and the decision of the arbitrator shall be a complete defense to any
action or proceeding instituted in any tribunal or agency with respect to any dispute, unless
precluded by federal statute.




     4.      Miscellaneous.




     (a) This Agreement will be governed by Michigan law and will be binding upon and will
inure to the benefit of the respective successors and assigns of the parties.




     (b) The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any right, power
or privilege under this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or privilege or the exercise of
any other right, power or privilege. To the maximum extent permitted by applicable law, (a)
no claim or right arising out of this Agreement can be discharged, in whole or in part, by a
waiver or renunciation of the claim or right except in writing; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it is given;
and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation
of such party, or of the right of the party giving such notice or demand to require the
other party, to take further action without notice or demand as provided in this Agreement.




     (c) Any action or proceeding seeking to enforce any provision of, or based upon any
right arising out of, this Agreement may be brought against any of the parties in the courts
of the State of Michigan, County of Washtenaw or, if it has or can acquire jurisdiction, in
the United States District Court for the Eastern District of Michigan, and the parties
consent to the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.




     (d) Whenever possible, each provision and term of this Agreement will be interpreted in
a manner to be effective and valid, but if any provision or term of this



 









 






Agreement is held to be prohibited or invalid, then such provision or term will be
ineffective only to the extent of such prohibition or invalidity, without invalidating or
affecting in any manner whatsoever the remainder of such provision or term or the remaining
provisions or terms of this Agreement. If any of the covenants set forth in this Agreement
are held to be unreasonable, arbitrary or against public policy, such covenants will be
considered divisible with respect to scope, time and geographic area, and in such lesser
scope, time and geographic area, will be effective, binding and enforceable against Seller
and Shareholders to the greatest extent permissible.




     (e) This Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken together, will
be deemed to constitute one and the same agreement.




     (f) The headings of sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to “Section” or
“Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise
specified. All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the word
“Including” does not limit the preceding words or terms.




     (g) All notices, consents, waivers and other communications under this Agreement must
be in writing and will be deemed to have been duly given when (a) delivered by hand (with
written confirmation of receipt); (b) sent by facsimile (with written confirmation of
receipt), provided that a copy is also promptly mailed by registered mail, return receipt
requested; or (c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate addresses
and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):



	 	 	 
	Executive:
	 	 
	

	 	

	

	 	







	 	 	 
	Company:

	 	315 East Eisenhower Parkway, Suite 300
	

	 	Ann Arbor, Michigan 48108






     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
first above written.



	 	 	 
	EXECUTIVE:

	 	KAYDON CORPORATION
	 
	 	 
	

	 	By: