Document:

exv10w1

 

Exhibit 10.1

STOCK PURCHASE AGREEMENT

     This
STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of October 17, 2006, is among Lear
Corporation, a Delaware corporation, (the “Company”), and those other parties named on the
signature page hereto (collectively, the “Buyers” or individually, a “Buyer”).

     WHEREAS, the Company and the Buyers desire to enter into this Agreement to purchase securities
in a private sale exempt from the registration requirements of the Securities Act of 1933, as
amended (the “‘33 Act”), and the rules of the United States Securities and Exchange Commission (the
“SEC”);

     WHEREAS, the Buyers wish, jointly and severally, to purchase, and the Company wishes to sell,
upon the terms and conditions stated in this Agreement, up to 5,797,102 shares of common stock, par
value $0.01 per share, of the Company (the “Common Stock”), for an aggregate purchase price of
approximately $133,333,346; and

     WHEREAS, the Buyers, jointly and severally, have committed to purchase up to an additional
2,898,551 shares of Common Stock pursuant to Section 1(c) hereof at the same price per share.

     NOW, THEREFORE, the Company and the Buyers hereby agree as follows:

			
	      1.	 	PURCHASE AND SALE OF PURCHASED SHARES

          (a) Purchase of Purchased Shares. Subject to the satisfaction (or waiver) of the
conditions set forth in Section 5 below, the Company shall issue and sell to the Buyers, and the
Buyers agree, jointly and severally, to purchase from the Company on the Closing Date (as defined
below), 5,797,102 shares of Common Stock (the “Purchased Shares”). The Purchased Shares will be
allocated among the Buyers as the Buyers shall instruct in writing one day prior to the Closing.
The closing of the transactions contemplated herein (the “Closing”) shall occur on the Closing Date
at the offices of Winston & Strawn LLP, 200 Park Avenue, New York, New York 10166.

          (b) Purchase Price. The aggregate purchase price for the Purchased Shares to be
purchased by the Buyers at the Closing shall be $133,333,346 (the “Purchase Price”).

          (c) Additional Shares. Following the execution and delivery of this Agreement, the
Company will offer to sell up to an additional 2,898,551 shares (“Additional Shares”) of Common
Stock in a sale exempt from the registration requirements of the ‘33 Act to certain of its existing
stockholders (“Other Offerees”) at a price per share of $23.00 and with Escrow arrangements similar
to the Buyers’. To the extent the Other Offerees have not entered into agreements to acquire the
Additional Shares by 9:00 a.m. on October 17, 2006, the Buyers, jointly and severally, shall buy
the unpurchased Additional Shares on the same terms and conditions on which they are acquiring the
Common Stock hereunder, such Additional Shares

 

 

will be deemed Purchased Shares for all purposes hereunder, and the Purchase Price will be
adjusted accordingly. Insofar as an Other Offeree defaults on its obligation to pay for Additional
Shares which it has agreed to purchase, the Buyers shall acquire such Additional Shares and they
shall be deemed Purchased Shares, and the Purchase Price will be adjusted accordingly. The Company
agrees that any sale of the Additional Shares is expressly conditioned upon the closing of the sale
of the Purchased Shares.

          (d) Escrow Amount. No later than 4:30 p.m. (New York time) on October 17, 2006 (the
“Escrow Closing”), the Buyers, jointly and severally, shall pay the Purchase Price into an escrow
account (the “Escrow”) pursuant to an Escrow Agreement (the “Escrow Agreement”) among the Company,
the Buyers and the Escrow Agent (the “Escrow Agent”), the terms of which will be agreed to prior to
the Escrow Closing. The funds held in the Escrow will be for the benefit of the Company and all
interest earned on these funds held in Escrow will be paid to the Company if the Purchased Shares
are sold to the Buyers. If the Purchased Shares are not sold to the Buyers, the interest will be
paid to the Buyers. These funds will be released to purchase the Purchased Shares when the
conditions to Closing have been met.

          (e) Closing Date. The date and time of the Closing (the “Closing Date”) shall be 8:30
a.m., New York City Time, one business day after the conditions in Section 5 have been met (or such
later date as is mutually agreed to by the Company and the Buyers).

          (f) Form of Payment. On the Closing Date, (i) in accordance with the Escrow
Agreement, the Escrow Agent shall pay the Purchase Price to the Company for the Purchased Shares to
be issued and sold to the Buyers at the Closing, by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions delivered to the Escrow Agent, and (ii) the
Company shall deliver to the Buyers certificates representing the Purchased Shares. Certificates
representing the Purchased Shares shall contain legends indicating that the shares underlying these
certificates have not been registered under the ‘33 Act and are subject to restrictions on their
transferability.

          (g) Dividends and Distributions. If the Company, at any time after the date hereof but
prior to the Closing, declares and pays a dividend or other distribution (in each case whether in
cash, in kind, in securities or otherwise) on its Common Stock, the Buyers shall be entitled to
receive their pro rate share of any such dividend or distribution as if the Buyer had acquired the
Purchased Shares and any Additional Shares prior to the record date for such dividend or
distribution. Such dividend or other distribution shall be paid at the Closing.

			
	      2.	 	REPRESENTATIONS AND WARRANTIES OF THE BUYERS

           The Buyers, jointly and severally, represent and warrant that:

          (a) Organization; Authority. Each Buyer is duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to enter into and to consummate the
transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder.

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          (b) Validity; Enforcement. The execution and delivery of this Agreement by each Buyer
and the consummation by each Buyer of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of each Buyer and no further consent or action is
required by any Buyer, its governing body, partners or members. This Agreement has been duly
executed and delivered by each Buyer and is a valid and binding obligation of each Buyer
enforceable against each Buyer in accordance with its terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.

          (c) Investment Intent. Each Buyer is a financially sophisticated institutional
investor and is an “accredited investor” (as defined in Rule 501 of Regulation D under the ‘33 Act)
that is experienced in financial matters and it is purchasing the Purchased Shares for its own
account for investment and with no present intention of, or view to, distributing such Purchased
Shares or any part thereof except in compliance with the ‘33 Act, but without prejudice to each
Buyer’s right at all times to sell or otherwise dispose of all or any part of the Purchased Shares
under a registration statement filed under the ‘33 Act, or in a transaction exempt from the
registration requirements of the ‘33 Act, including a transaction pursuant to Rule 144.

          (d) Ownership Interest. Upon giving effect to the transactions contemplated by this
Agreement (excluding any acquisition of Additional Shares), the Buyers (together with their
affiliates and associates) will hold an aggregate of 9,096,393 shares of Common Stock and will have
economic exposure with respect to an additional 5,836,400 shares of Common Stock pursuant to cash
settled contracts with various counterparties, such shares subject to such contracts being
“Exposure Shares.” None of the Buyers have direct or indirect voting rights or dispositive rights
or powers with respect to the Exposure Shares (although the Buyers do have the right to request,
but not demand , that the contracts be terminated prior to the scheduled termination dates thereof)
nor shall the Buyers be deemed to be the Beneficial Owners of any Exposure Shares for any purposes
under this Agreement, except as expressly set forth herein. For purposes of this Agreement, (i)
“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and successor regulation thereto, (ii) “Beneficial Ownership”
and “Beneficially Own” shall refer to the ownership interest of a Beneficial Owner, (iii)
“affiliate” shall have the meaning set forth in Rule 12b-2 under the Exchange Act, or any successor
regulation thereto, and (iv) “associate” shall have the meaning set forth in Rule 12b-2 under the
Exchange Act, or any successor regulation thereto. For the avoidance of doubt, clauses (i) and
(ii) of this subsection (d) shall not include any Exposure Shares.

			
	      3.	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY

           The Company hereby makes the following representations and warranties to the Buyers:

          (a) Organization and Qualification. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware, with the requisite
corporate power and authority to own and use its properties and assets and to carry on its
business. The Company is not in violation of, nor will the consummation of the

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transaction contemplated herein violate, any of the provisions of its certificate of
incorporation or bylaws. The Company is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, would not, individually or in the aggregate: (i) be materially
adversely affect the legality, validity or enforceability of this Agreement, or (ii) have or result
in a material adverse effect on the results of operations, assets, business or condition (financial
or otherwise) of the Company, taken as a whole.

          (b) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by
the Company and the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company and no further consent or action is
required by the Company, its board of directors or its stockholders. This Agreement has been duly
executed and delivered by the Company and is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.

          (c) Authorization of the Purchased Shares. The Purchased Shares have been duly
authorized and when issued in accordance with this Agreement against payment therefor will be
validly issued, fully paid and nonassessable. None of the Purchased Shares will be issued in
violation of the preemptive or other similar rights of any securityholder of the Company nor will
they trigger any anti-dilution or similar rights under the Company’s Certificate of Incorporation
or any material agreement to which the Company is subject or bound.

          (d) No General Solicitation. Neither the Company nor any person acting on its behalf
has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise
negotiated in respect of, or will solicit any offer to buy or offer to sell or otherwise negotiate
in respect of, any security which is or would be integrated with the sale of the Purchased Shares
in a manner that would require the Purchased Shares to be registered under the ‘33 Act. Neither
the Company nor any person acting on its behalf has engaged or will engage in connection with the
offering of the Purchased Shares in any form of general solicitation or general advertising within
the meaning of Rule 502(c) under the ‘33 Act.

          (e) Section 203. The Company has taken all necessary corporate action to approve the
acquisition of the Purchased Shares by the Buyers and any subsequent purchases by the Buyers that
do not exceed the limitations set forth in Section 6(a)(ii) of this Agreement, including any
necessary corporate action to cause the Buyers not to be deemed an interested stockholder for
purposes of Section 203 of the Delaware General Corporation Law (“Section 203”) by reason of such
purchase or purchases. A copy of the Board’s 203 resolution is attached as Exhibit A hereto and
indicates that the approval is limited as set forth thereon.

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          (f) Offering Memorandum. The Company has delivered to the Buyers an Offering
Memorandum dated October 16, 2006 (the “Offering Memorandum”). The documents incorporated in the
Offering Memorandum by reference, when taken together with the Offering Memorandum, do not, as of
the date hereof, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

          (g) Assuming the accuracy of the Buyers’ representation in Section 2(d) hereof, the issuance
and sale of the Purchased Shares, and the consummation of the transactions contemplated herein will
not cause any default under and will not accelerate the vesting of any benefit under the Lear
Corporation Long Term Stock Incentive Compensation Plan or other material agreement of the Company.

			
	      4.	 	COVENANTS

          (a) Best Efforts. Each party shall use its best efforts timely to satisfy the
conditions set forth in Section 5 of this Agreement, including, without limitation, doing the
things necessary, proper or advisable with respect to all filing and permissions (including
promptly providing all requested information with respect to second requests) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) to consummate the transactions
herein. Each party covenants and agrees to use its best efforts to complete the HSR Act filing
within ten days of the date hereof. The Company will undertake all necessary action to cause the
Purchased Shares to be authorized for listing on the New York Stock Exchange upon official notice
of issuance.

			
	      5.	 	CONDITIONS TO THE COMPANY’S AND THE BUYERS’ OBLIGATION 
TO SELL AND PURCHASE THE PURCHASED SHARES

          The obligation of the Buyers hereunder to purchase the Purchased Shares, and of the Company to
issue and sell the Purchased Shares to the Buyers at the Closing is subject to the following
conditions:

          (a) Any approvals required under the HSR Act shall have been obtained or the waiting period
required thereby shall have expired or otherwise been terminated and no action shall have been
taken by the United States Department of Justice or the United States Federal Trade Commission
challenging and seeking to enjoin, or threatening to enjoin, the transactions contemplated under
the Agreement.

          (b) The shares of Common Stock to be issued pursuant to the transaction contemplated herein
shall have been authorized for listing on the New York Stock Exchange, subject to official notice
of issue.

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	      6.	 	POST CLOSING AGREEMENTS

          (a) Standstill. (i) The Buyers agree that from and after the date of this Agreement,
the Buyers shall not, and shall not permit any of their affiliates or associates
(collectively, the “Buyer Group”), to directly or indirectly, unless in any such case
specifically invited in writing to do so by the board of directors of the Company (the “Company
Board”):

                    (A) for a period of one year from the Closing, initiate, participate in, or consent to the
taking of any stockholder action by consent without a meeting pursuant to Section 228 of the
Delaware General Corporation Law (unless initiated or not opposed by the Company);

                    (B) for a period of one year from the Closing, request the Company (or its directors,
officers, employees or agents), directly or indirectly, to amend or waive any provisions of Section
6(a) or of this Agreement (including this Section 6(a)(i)(B)), or otherwise seek any modification
to or waiver of any of the Buyer Group’s agreements or obligations under Section 6(a) of this
Agreement; or

                    (C) for a period of one year from the Closing, encourage or render advice to or make any
recommendation or proposal to any person to engage in any of the actions covered by this Section
6(a) (including this clause(C)).

               (ii) If any time, without the consent of the Company Board, the Buyer Group’s Beneficial
Ownership of Common Stock and economic exposure pursuant to contracts in the Common Stock exceeds
24% of the issued and outstanding Common Stock (other than as a result of the Company’s net
purchases of Common Stock exceeding its issuance for the period subsequent to the Closing to the
point in time in question), the provisions of Section 203 (taken in its entirety) shall govern with
respect to each member of the Buyer Group engaging in any “business combination” with the Company,
as if the transaction that results in such excess share ownership had caused the Buyers to become
“interested stockholders” under Section 203, as such terms are defined in Section 203.

               (iii) For a period of one year from the Closing, each member of the Buyer Group shall agree to
give to the Company: (A) one business day prior review of any proposed press release, public
announcement or of any filing with the SEC relating to the Company by any member of the Buyer Group
(but the Company shall have no right to comment and shall not make any public statements in
response in the interim unless required by law, in which event the notice period shall thereupon
terminate), and (B) seven business days advance notice prior to soliciting other holders of Common
Stock to take stockholder action with respect to a proposed election of director, or participating
in a business combination with the Company (but the Company shall have no right to comment and
shall not make any public statements in response in the interim unless required by law, in which
event the notice period shall thereupon terminate). During such seven day period, the Company will
not adopt a shareholder rights plan or amend any charter or bylaw provisions, or take any other
corporate action, to restrict shareholder rights.

               (iv) The Company and Buyers agree that the Company, in addition to any other remedy to which
it may be entitled in law or in equity, shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of Section 6(a) of this Agreement and to compel specific
performance of Section 6(a) of this Agreement, without the need for proof of actual damages.

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          (b) Board Representation. (i) The Company agrees at its next regularly scheduled
meeting (which are scheduled on a quarterly basis) of the Company Board occurring after the Closing
to elect Vincent Intrieri (“Buyers’ Nominee”) as a director of the Company and that the Company’s
Nominating and Corporate Governance Committee will propose the Buyers’ Nominee for election as a
director with a term expiring at the 2008 Annual Meeting of Shareholders of the Company. The
Buyers warrant that the Buyers’ Nominee meets each of the criteria set forth in Section 6(b)(ii)
hereof. Subject to its fiduciary duties, the Company’s Board of Directors will nominate the
Buyers’ Nominee (or, if the Buyers’ Nominee is unable or unwilling to serve, a successor as
contemplated by Section 6(b)(ii)) for election at each meeting at which time the Buyer’s nominee is
up for election (or in each action by written consent in lieu of a meeting) of stockholders of the
Company for the election of directors.

               (ii) If the Buyer’s Nominee (or such a successor) is no longer a director of the Company as
contemplated by paragraph 6(b)(i), the Buyer may propose to the Company as a nominee for election
as a director of the Company a person with reasonable qualifications who is not a former director,
officer or employee of the Company and is not engaged in activities which present a material
conflict of interest with the Company, in which event, with the Company’s consent (such consent not
to be unreasonably withheld), such person will be proposed to the Nominating and Corporate
Governance Committee.

               (iii) The Company will use its best efforts to cause the Buyer’s Nominee or any such successor
nominated as provided in this Section 6(b) to be elected by the stockholders of the Company and
will solicit proxies in favor of the Buyer’s Nominee or any such successor at each meeting (or in
each action by written consent in lieu of a meeting) of stockholders of the Company.

               (iv) If the Company does not accept a Buyer designee as provided in paragraph 6(b)(ii), the
process set forth therein shall be repeated so long as necessary to find a successor candidate
acceptable to both the Buyer and the Company.

               (v) The Company’s obligations under this Section 6(b) shall terminate when the Buyer
Beneficially Owns less than 15% of the Company’s outstanding shares of Common Stock (including as
Beneficially Owned, for purposes of this Section 6(b)(v) only, the Exposure Shares).

          (c) Registration Rights. (i) (A) Within thirty (30) days after the Closing Date (the
“Filing Deadline”), the Company shall prepare and file with the SEC a “Shelf” Registration
Statement (the “Registration Statement”) covering the resale of all Common Stock constituting
Purchased Shares and all other Common Stock held by the Buyers held as of the date hereof
(“Registrable Securities”) for an offering to be made on a continuous basis pursuant to Rule 415.
The Company shall also include, as reasonably requested from time to time, any shares of Common
Stock acquired after the date hereof by the Buyers in the Registration Statement; any such shares
so included shall be deemed Registrable Securities for purposes of this Agreement. The
Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register
for resale the Common Stock on Form S-3, in which case such registration shall be on
another appropriate form). In the event that the Registration Statement has not been filed by
the Filing Deadline, the Company will pay the Buyers a fee equal to 0.5% of the Purchase Price.

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                    (B) The Company shall use its best efforts to cause the Registration Statement to be declared
effective upon filing with the SEC or as promptly as possible after the filing thereof and shall
use its best efforts to keep the Registration Statement continuously effective under the ‘33 Act
until such time as the Buyers receive an opinion acceptable to Buyer from Company counsel to the
effect that the Registrable Securities may be resold in a transaction exempt from the registration
requirements of the ‘33 Act without regard to any volume or other restrictions under the ‘33 Act
(the “Effectiveness Period”). In the event that the Registration Statement is not declared
effective within one hundred twenty (120) days following the Closing (the “Effectiveness
Deadline”), the Company will pay the Buyers a fee equal to 0.5% of the Purchase Price. In
addition, every sixty (60) days from the Effectiveness Deadline until the Registration Statement is
declared effective, the Company shall pay to the Buyers an amount in cash equal to 0.5% of the
Purchase Price, accruing daily and prorated for any partial period; provided,
however, that the aggregate amount of liquidated damages for which the Company is liable
pursuant to Sections 6(c)(i)(A)-(B) shall not exceed five percent (5%) of the Purchase Price. The
payment of any of these fees does not relieve the Company of its registration obligations under
this subsection (c).

                    (C) The Company shall notify the Buyer in writing promptly that the Registration Statement has
become effective.

                    (D) Notwithstanding anything to the contrary in this Agreement, the Company may, one time in
any twelve (12) month period, for up to a maximum of seventy-five (75) days, delay the filing or
effectiveness of a Registration Statement or suspend the effectiveness of a Registration Statement
if the Company shall have determined in good faith, upon advice of counsel, that it would be
required to disclose any significant corporate development which disclosure would have a material
effect on the Company.

                    (E) So long as the Company pursues in good faith the provisions of this Section 6(c), the fees
provided for in Section 6(c) shall be treated as liquidated damages and the Company shall have no
further liability to the Buyers, provided however, that if the Company is not so
pursuing the provisions of Section 6(c) in good faith, the Buyers shall be entitled to claim
damages in addition to the fees owed under Section 6(c).

               (ii) Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:

                    (A) Not less than three business days prior to the filing of a Registration Statement or any
related prospectus or any amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company shall (I) furnish to
the Buyers copies of all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the review of the Buyer
(it being understood that such review must be completed within three business days of receipt of
the applicable documents), and (II) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel, to conduct a
reasonable investigation within the meaning of the ’33 Act.

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                    (B) (I) Prepare and file with the SEC such amendments, including post-effective amendments, to
each Registration Statement and the prospectus used in connection therewith as may be necessary to
keep the Registration Statement continuously effective as to the applicable Registrable Securities
for the Effectiveness Period and prepare and file with the SEC such additional Registration
Statements in order to register for resale under the ‘33 Act all of the Registrable Securities;
(II) cause the related prospectus to be amended or supplemented by any required prospectus
supplement, and as so supplemented or amended to be filed; (III) respond promptly to any comments
received from the SEC with respect to the Registration Statement or any amendment thereto; and (IV)
comply in all material respects with the provisions of the ‘33 Act with respect to the disposition
of all Registrable Securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Buyers thereof set forth in the
Registration Statement as so amended or in such prospectus as so supplemented.

                    (C) Notify the Buyers promptly of any of the following events: (I) the SEC notifies the
Company whether there will be a “review” of any Registration Statement; (II) the SEC comments in
writing on any Registration Statement covering Registrable Securities; (III) any Registration
Statement or any post-effective amendment is declared effective; (IV) the SEC or any other Federal
or state governmental authority requests any amendment or supplement to any Registration Statement
or prospectus or requests additional information related thereto; (V) the SEC issues any stop order
suspending the effectiveness of any Registration Statement or initiates any proceedings for that
purpose; (VI) the Company receives notice of any suspension of the qualification or exemption from
qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or
threat of any proceeding for such purpose; or (VII) the financial statements included in any
Registration Statement become ineligible for inclusion therein or any statement made in any
Registration Statement or prospectus or any document incorporated or deemed to be incorporated
therein by reference is untrue in any material respect or any revision to a Registration Statement,
prospectus or other document is required so that it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading.

                    (D) Furnish to the Buyers, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the SEC.

                    (E) Promptly deliver to the Buyers, without charge, as many copies of the prospectus or
prospectuses (including each form of prospectus) and each amendment or supplement thereto as the
Buyers may reasonably request.

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                    (F) Prior to any public offering of Registrable Securities, use its commercially reasonable
best efforts to register or qualify or cooperate with the Buyers in connection with the
registration or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as the Buyers requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement.

                    (G) Upon the occurrence of any event described in Section 6(b)(ii)(C), promptly prepare a
supplement or amendment, including a post-effective amendment, to the Registration Statement or a
supplement to the related prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such prospectus will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading.

                    (H) Comply with all applicable rules and regulations of the SEC.

                    (I) Enter into and perform its obligations under an underwriting agreement, in usual and
customary form, including, without limitation, by providing customary legal opinions, comfort
letters and indemnification and contribution obligations, in the event that the Buyers notify the
Company of their intent to resell the Registrable Securities pursuant to an underwritten offering
and of the selected underwriter(s) for such offering.

In connection with the registration of the Registrable Securities, it shall be a condition
precedent to the obligations of the Company to complete the registration pursuant to this Agreement
with respect to the Registrable Securities that the Buyers shall furnish to the Company such
information reasonably requested by it to complete the Registration Statement.

               (iii) Registration Expenses. The Company shall pay the following expenses incident to
the performance of or compliance with its obligations under Section 6(c) of this Agreement: (A) all
registration and filing fees and expenses, including without limitation those related to filings
with the SEC and in connection with applicable state securities or Blue Sky laws, (B) printing
expenses (including without limitation expenses of printing prospectuses requested by the Buyer),
(C) fees and expenses of all persons retained by the Company in connection with the consummation of
the transactions contemplated by this Agreement, (D) all listing fees to be paid by the Company to
the New York Stock Exchange and (E) the reasonable fees and expenses of one counsel for the Buyers.
The Company shall not be obligated to pay, if applicable, any underwriting discounts and
commissions with respect to the sale of any Common Stock.

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               (iv) (A) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Buyer, the officers, directors, partners, members, agents, and employees of each of them, each person
who controls each Buyer (within the meaning of Section 15 of the ‘33 Act or Section 20 of the
Exchange Act) and the officers, directors, partners, members, agents and employees of each such
controlling person, to the fullest extent permitted by applicable law, from and against any and all
losses, as incurred, arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any prospectus or any form of prospectus or
in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were made) not misleading,
except to the extent, but only to the extent, that (i) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based solely upon information regarding the Buyer
furnished in writing to the Company by any Buyer expressly for use therein, or to the extent that
such information relates to any Buyer’s proposed method of distribution of Common Stock and was
reviewed and approved in writing by any Buyer expressly for use in the Registration Statement, such
prospectus or such form of prospectus or in any amendment or supplement thereto or (ii) in the case
of an occurrence of an event of the type specified in Section 6(c)(ii)(C), the use by any Buyer of
an outdated or defective prospectus after the Company has notified the Buyers in writing that the
prospectus is outdated or defective. The Company shall notify the Buyers promptly of the
institution, threat or assertion of any proceeding of which the Company is aware in connection with
the transactions contemplated by this Agreement.

                    (B) Indemnification by Buyers. The Buyers, jointly and severally, shall indemnify and
hold harmless the Company, its directors, officers, agents and employees, each person who controls
the Company (within the meaning of Section 15 of the ‘33 Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling persons, to the fullest extent
permitted by applicable law, from and against all losses (as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or review) arising solely out of any untrue
statement of a material fact contained in the Registration Statement, any prospectus, or any form
of prospectus, or in any amendment or supplement thereto, or arising solely out of any omission of
a material fact required to be stated therein or necessary to make the statements therein (in the
case of any prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so furnished in writing by
any Buyer to the Company specifically for inclusion in such Registration Statement or such
prospectus or to the extent that (i) such untrue statements or omissions are based solely upon
information regarding such Buyer furnished in writing to the Company expressly for use therein, or
to the extent that such information relates to any Buyer or such Buyer’s proposed method of
distribution of Common Stock and was reviewed and expressly approved in writing by the Buyer
expressly for use in the Registration Statement, such prospectus or such form of prospectus or in
any amendment or supplement thereto or (ii) in the case of an occurrence of an event of the type
specified in Section 6(c)(ii)(C), the use by any Buyer of an outdated or defective prospectus after
the Company has notified such Buyer in writing that the prospectus is outdated or defective. In no
event shall the liability of the Buyers hereunder be greater in amount than the dollar amount of
the net proceeds received by the Buyers upon the sale of the Common Stock giving rise to such
indemnification obligation.

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                    (C) Conduct of Indemnification Proceedings. If any proceeding shall be brought
or asserted against any person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations
or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

                    An Indemnified Party shall have the right to employ separate counsel in any such proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such proceeding; or (iii) the named parties to any such proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such
proceeding effected without its written consent, which consent shall not be unreasonably withheld.
No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such proceeding.

                    All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such proceeding in a manner
not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten
business days of written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to indemnification hereunder;
provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).

                    (D) Contribution. If a claim for indemnification under subsection (A) or (B) is
unavailable to an Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in

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connection with the actions, statements or omissions that resulted in such losses as well as
any other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any losses shall be deemed to include, subject
to the limitations set forth in subsection (C), any reasonable attorneys’ or other reasonable fees
or expenses incurred by such party in connection with any proceeding to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided for in this Section
was available to such party in accordance with its terms.

                    The parties hereto agree that it would not be just and equitable if contribution pursuant to
this subsection (D) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this subsection (D), the Buyers shall not
be required to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by the Buyers from the sale of the Common Stock subject to the
proceeding exceeds the amount of any damages that the Buyer has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the ‘33 Act) shall
be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.

     7. TERMINATION

          In the event that the Closing shall not have occurred on or before May 1, 2007 due to the
Company’s or any Buyer’s failure to satisfy the conditions set forth in Sections 5 above (and the
nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement; provided that the Company shall have no right to
terminate this Agreement for the failure to meet the condition in Section 5(b) hereof. In the
event of a termination of this Agreement, funds held in Escrow, together with any interest earned
thereon, shall be immediately paid to the Buyers. In the event of termination of this Agreement
pursuant to this Section 7, no party will have any liability or any further obligation to any other
party, except that nothing in this Agreement releases, or may be construed as releasing, any party
to this Agreement from any liability or damage to any other party arising out of any party’s
default or breach under this Agreement.

     8. MISCELLANEOUS

          (a) Governing Law. This Agreement shall be construed in accordance with and governed
for all purposes by the laws of the State of New York applicable to contracts executed and to be
wholly performed within such State without giving effect to its conflicts of laws principles
thereof.

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          (b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.

          (c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

          (d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction

          (e) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyers, the Company, their affiliates and persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, neither the
Company nor the Buyers make any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended other than by an instrument in writing
signed by the Company and the Buyer. No provision hereof may be waived other than by an instrument
in writing signed by the party against whom enforcement is sought.

          (f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

               If to the Company:

	 	 	 	 	 
	 	 	Lear Corporation
	 	 	21557 Telegraph Road
	 	 	Southfield, Michigan 48034
	 
	 	Facsimile:	 	(248) 447-1677
	 
	 	Attention:	 	Daniel A. Ninivaggi
	 
	 	 	 	Executive Vice President and General Counsel

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               with a copy to (for information purposes only):

	 	 	 	 	 
	 	 	Winston & Strawn LLP
	 	 	35 West Wacker Drive
	 	 	Chicago, IL 60601
	 
	 	Facsimile:	 	312-558-5700
	 
	 	Attention:	 	Bruce A. Toth, Esq.

               If to the Buyers:

	 	 	 	 	 
	 	 	c/o Icahn Associates Corp.
	 	 	767 Fifth Avenue
	 	 	New York, NY 10153
	 
	 	Facsimile:	 	212-750-5815
	 
	 	Attn:	 	Vince Intrieri, and
	 
	 	 	 	Keith Meister

               with a copy to (for information purposes only):

	 	 	 	 	 
	 	 	c/o Icahn Associates Corp.
	 	 	767 Fifth Avenue
	 	 	New York, NY 10153
	 
	 	Facsimile:	 	212-688-1158
	 
	 	Attn:	 	Marc Weitzen, Esq.

or to such other address and/or facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of
such notice, consent, waiver or other communication, (ii) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (iii) provided by an overnight courier service
shall be evidence of personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

          (g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns. The Company and the Buyers
shall not assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other party; provided that the Buyers may assign their rights and obligations
hereunder to any affiliate of Carl C. Icahn (although such assignment shall not relieve such Buyer
of its obligations under this Agreement).

          (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person.

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          (i) Survival. The representations and warranties of the Buyers and the Company
contained in Sections 2 and 3 and the agreements and covenants of the Buyers and the
Company contained in sections forth in Sections 6 and 8 shall survive the Closing. In the
event this Agreement is terminated pursuant to Section 7, the agreements and covenants of the Buyer
and the Company contained in Sections 4, 6 and 8 shall be of no further force and effect except as
set forth in Section 7.

          (j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

[Signature Page Follows]

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     IN WITNESS WHEREOF, the Buyer and the Company have caused their respective signature page to
this Stock Purchase Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	LEAR CORPORATION

 	 
	 	By:  	/s/ Daniel A. Ninivaggi
 	 
	 	 	Name:  	Daniel A. Ninivaggi 	 
	 	 	Title:  	EVP & General Counsel 	 
	 
	 	BUYERS:

ICAHN PARTNERS LP

 	 
	 	By:  	/s/ Keith Meister
 	 
	 	 	Name:  	Keith Meister 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	ICAHN PARTNERS MASTER FUND LP

 	 
	 	By:  	/s/ Keith Meister
 	 
	 	 	Name:  	Keith Meister 	 
	 	 	Title:  	Authorized Signatory 	 

-17-

 

	 	 	 	 	 

	 	 	 	 	 
	 	KOALA HOLDING LLC

 	 
	 	By:  	/s/ Edward Mattner
 	 
	 	 	Name:  	Edward Mattner 	 
	 	 	Title:  	Authorized Signatory 	 
	 

-18-exv10w1

 

EXHIBIT 10.1

KAYDON CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

As Amended and Restated

 

 

Table of Contents

	 	 	 	 	 	 	 	 	 
	Article	 	 	 	 	 	Page	 
	 
	 	 	 	 	 	 	 	 
	I	 	Establishment	 	 	1	 
	 
	 	1.1	 	Effective Date	 	 	1	 
	 
	 	1.2	 	Intent	 	 	1	 
	 
	 	1.3	 	Trust	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	II	 	Definitions	 	 	3	 
	 
	 	2.1	 	Accrued Benefit	 	 	3	 
	 
	 	2.2	 	Active Participant	 	 	3	 
	 
	 	2.3	 	Actuarial Equivalent	 	 	4	 
	 
	 	2.4	 	Average Monthly Compensation	 	 	4	 
	 
	 	2.5	 	Board of Directors	 	 	4	 
	 
	 	2.6	 	Compensation	 	 	4	 
	 
	 	2.7	 	Committee	 	 	4	 
	 
	 	2.8	 	Complying Election	 	 	4	 
	 
	 	2.9	 	Covered Compensation	 	 	5	 
	 
	 	2.10	 	Disability	 	 	5	 
	 
	 	2.11	 	Disability Retirement Eligibility	 	 	5	 
	 
	 	2.12	 	Early Retirement Eligibility	 	 	6	 
	 
	 	2.13	 	Employer	 	 	6	 
	 
	 	2.14	 	Normal Retirement Eligibility	 	 	6	 
	 
	 	2.15	 	Plan Year	 	 	6	 
	 
	 	2.16	 	Specified Employee	 	 	6	 
	 
	 	2.17	 	Vested Retirement Eligibility	 	 	7	 
	 
	 	2.18	 	Year of Credited Service	 	 	7	 
	 
	 	2.19	 	Year of Vesting Service	 	 	9	 
	 
	 	 	 	 	 	 	 	 
	III	 	Benefits	 	 	9	 
	 
	 	3.1	 	Normal Retirement Benefit	 	 	9	 
	 
	 	3.2	 	Early Retirement Benefit	 	 	9	 
	 
	 	3.3	 	Vested Retirement Benefit	 	 	10	 
	 
	 	3.4	 	Disability Benefit	 	 	10	 
	 
	 	3.5	 	Death Benefit	 	 	11	 
	 
	 	3.6	 	Benefit Limitations	 	 	12	 
	 
	 	3.7	 	Special Transfer Employee Rule	 	 	14	 
	 
	 	3.8	 	Change in Control Override	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	IV	 	Distribution	 	 	15	 
	 
	 	4.1	 	Time and Method of Payment	 	 	15	 
	 
	 	4.2	 	Method of Payment	 	 	16	 
	 
	 	4.3	 	Designation of Beneficiary	 	 	18	 
	 
	 	4.4	 	Claims Procedure	 	 	18	 
	 
	 	4.5	 	Facility of Payment	 	 	19	 
	 
	 	4.6	 	Offset	 	 	20	 
	 
	 	4.7	 	Distribution in the Event of Taxation	 	 	20	 
	 
	 	4.8	 	Permissible Distribution	 	 	21	 

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	Article	 	 	 	 	 	Page	 
	 
	V	 	Administration	 	 	22	 
	 
	 	5.1	 	Committee	 	 	22	 
	 
	 	5.2	 	Limitation of Liability and Indemnification	 	 	23	 
	 
	 	 	 	 	 	 	 	 
	VI	 	Amendment and Termination of Plan	 	 	23	 
	 
	 	6.1	 	Amendment or Termination	 	 	23	 
	 
	 	6.2	 	Change in Control Agreement	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	VII	 	Miscellaneous	 	 	25	 
	 
	 	7.1	 	Nonassignability	 	 	25	 
	 
	 	7.2	 	Employment Rights Not Enlarged	 	 	25	 
	 
	 	7.3	 	Participants’ Rights Limited	 	 	25	 
	 
	 	7.4	 	Interpretation and Construction	 	 	26	 
	 
	 	7.5	 	Governing Law	 	 	26	 
	 
	 	7.6	 	Arbitration	 	 	26	 
	 
	 	 	 	 	 	 	 	 
	Appendix A	 	Other Employers	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Appendix B	 	Active Participants	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Appendix C	 	Additional Credit Under Section 2.18(a)	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Appendix D	 	Discretionary Credit Under Section 2.18(b)	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Appendix E	 	Actuarial Factors	 	 	 	 

-ii-

 

SERP 10.06

KAYDON CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     Kaydon Corporation and certain of its related entities identified in Appendix A (individually,
an Employer, or collectively, the Employers) amend and restate the Kaydon Corporation Supplemental
Executive Retirement Plan (the Plan) effective January 1, 2005.

ARTICLE I

Establishment

     1.1 Effective Date. This Plan was generally effective as of January 1, 1994 as to
Kaydon Corporation and January 1, 1997 as to the other Employer or Employers. The Plan was amended
and restated in 1997 and 1998, in both cases to reflect amendments adopted by the Board November 7,
1996, and is now further amended and restated to reflect new Section 409A of the Internal Revenue
Code and to make certain other clarifying changes.

     1.2 Intent. The Plan is intended to be an unfunded deferred compensation arrangement
for purposes of the Internal Revenue Code of 1986, as amended (the Code) and for purposes of Title
I of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

     (a) ERISA Exemption. The Plan is provided for the benefit of a select group of
management employees, is intended to result in taxation to participants only when amounts are
actually received under this Plan and is intended to be exempt from the participation, funding,
vesting and fiduciary requirements of ERISA.

     (b) Unfunded. The Plan constitutes only a promise by each Employer to make benefit
payments in the future. Participants have the status of general unsecured creditors of their
Employer.

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     1.3 Trust. Any trust created by an Employer and any assets held by the trust to
assist the Employer in meeting its obligations under this Plan will conform, in general form, to
the terms of the model trust described in Rev. Proc. 92-64 as modified from time to time.
Notwithstanding that general rule, however, effective January 1, 2008, no new assets may be set
aside in any such trust (or any other arrangement) to fund benefits under this Plan for any Covered
Employee during any Restricted Period.

     (a) Covered Employee. A Covered Employee is the Chief Executive Officer of the
Employer or any member of a controlled group that includes the Employer (or any individual acting
in that capacity) during the taxable year, the four highest compensated officers of the Employer
for the taxable year (in addition to the Chief Executive Officer), any other individuals subject to
Section 16(a) of the Securities Exchange Act of 1934 for the taxable year, and any former employee
of the Employer or any member of a controlled group that includes the Employer who was a Covered
Employee at the time of termination of employment with the Employer or that controlled group
member.

     (b) Restricted Period. The Restricted Period is any period that a defined benefit
plan maintained by the Employer or any member of a controlled group that includes the Employer is
“at risk” as defined in regulations under Section 409A of the Code, any period the Employer is in
bankruptcy, or the 12 month period beginning six months before the termination of any underfunded
defined benefit plan maintained by the Employer or any member of a controlled group that includes
the Employer.

-2-

 

ARTICLE II

Definitions

     2.1 Accrued Benefit. A participant’s Accrued Benefit is the Retirement Benefit earned
to date under the Basic form taking into account the offset of the participant’s accrued benefit
under the Kaydon Corporation Retirement Plan from time to time.

     (a) Calculation. The Accrued Benefit is based on the Average Monthly Compensation,
Years of Vesting Service, Years of Credited Service (to a maximum of 30), the benefit formula and
the remaining Plan provisions in effect at the earlier of termination of employment, cessation of
Active Participation, or other earlier computation date and, for purposes of determining the
accrued benefit under the Kaydon Corporation Retirement Plan, the terms of that Plan in effect from
time to time.

     (b) Reduction. The Accrued Benefit of a participant who receives payment of any
benefits under the Plan is reduced by the Actuarial Equivalent of the payments.

     2.2 Active Participant. An Active Participant is an employee of Kaydon Corporation or
a wholly owned subsidiary of Kaydon Corporation which has adopted this Plan who has been designated
by the Board of Directors or by the Compensation Committee of the Board of Directors as eligible to
begin accruing benefits under this Plan and is identified in Appendix B.

     (a) Cessation of Active Participation. An employee who becomes an Active Participant
remains an Active Participant until the earlier of the date the employee is no longer actively
employed in that manner and the date the employee is removed from this Plan by the Board of
Directors or the Compensation Committee.

     (b) Participation. An individual who is or was an Active Participant remains a
participant until no further amounts are payable to the individual under this Plan.

-3-

 

     2.3 Actuarial Equivalent. Actuarial Equivalence is determined under the assumptions
and methods set forth in Appendix E.

     2.4 Average Monthly Compensation. Average Monthly Compensation is the participant’s
Average Monthly Compensation determined under the Kaydon Corporation Retirement Plan, calculated at
the earlier of termination of employment, cessation of Active Participation, or other earlier
computation date using the definition of Compensation contained in this Plan.

     2.5 Board of Directors. The Board of Directors is the Board of Directors of Kaydon
Corporation.

     2.6 Compensation. Compensation is Compensation as provided in the Kaydon Corporation
Retirement Plan, except that Compensation is determined without application of the Code Section
401(a)(17) Dollar Limit and the Compensation Dollar Limit of the Kaydon Corporation Retirement
Plan.

     2.7 Committee. The Committee is the Compensation Committee of the Board of Directors.
Any members of the Committee who are employees may not receive compensation for their services to
the Committee relating to this Plan.

     2.8 Complying Election. A Complying Election is an election that:

     (a) 2006. If made prior to January 1, 2007, applies only to amounts that would not
otherwise be payable in 2006 and does not cause an amount to be paid in 2006 that would not
otherwise be payable in 2006; and

-4-

 

     (b) 2007. If made on or after January 1, 2007 and before January 1, 2008, applies only
to amounts that would not otherwise be payable in 2007 and does not cause an amount to be paid in
2006 that would not otherwise be payable in 2007.

     2.9 Covered Compensation. Covered Compensation is Covered Compensation as provided in
the Kaydon Corporation Retirement Plan.

     2.10 Disability. Disability is the occurrence of any medically determinable physical
or mental impairment that:

     (a) Condition. Is expected to result in death or to last for a continuous period of
not less than 12 months;

     (b) Cessation of Work. Causes the individual to cease active work with the Employer;

     (c) Approval. Is approved by the Board of Directors or the Committee in its
discretion, based on evidence satisfactory to it; and

     (d) Effect. Causes the Participant to:

     (i) Activity. Be unable to engage in any substantial gainful activity; or

     (ii) Benefit. Receive income replacement benefits for a period of not less than three
months under an accident and health plan covering employees of the Employer.

     Receipt of permanent and total disability benefits under the Social Security Act, as amended,
or a finding of Disability for purposes of the Kaydon Corporation Retirement Plan may be considered
by the Board or the Committee, but are not dispositive.

     2.11 Disability Retirement Eligibility. Disability Retirement Eligibility is the
Disability of an Active Participant who has attained age 55 and completed at least ten (10)

-5-

 

Years of Vesting Service or ten (10) Years of Credited Service (without regard to any
Additional Credit provided under Section 2.18(a) or (b)).

     2.12 Early Retirement Eligibility. Early Retirement Eligibility is the attainment
of age 55 and the completion of at least ten (10) Years of Vesting Service by an Active
Participant.

     2.13 Employer. Employer means Kaydon Corporation and any wholly owned subsidiary of
Kaydon Corporation which has adopted this Plan.

     2.14 Normal Retirement Eligibility. Normal Retirement Eligibility is:

     (a) General Rule. The attainment of age 65 and the completion of at least ten (10)
Years of Vesting Service or ten (10) Years of Credited Service (without regard to any Additional
Credit provided under Section 2.18(a) or (b)) by an Active Participant; or

     (b) Special Rule. The attainment of age 65 by an Active Participant who was first
employed by an Employer after age 55.

     2.15 Plan Year. The Plan Year is an annual accounting period ending each December 31.

     2.16 Specified Employee. Specified Employee means an employee who, at any
time during the 12-month period ending on December 31 of each
year (the “Identification Date”), is:

     (a) Officer. An officer of the employer with annual compensation greater than
$140,000 in 2006 (as adjusted for future years as provided in Section 416 of the Code);

     (b) Five Percent Owner. A 5-percent owner of the Employer; or

     (c) One Percent Owner. A 1-percent owner of the Employer with annual

-6-

 

compensation greater than $150,000.

     Such an employee is a Specified Employee for the 12-month period beginning the first April 1
following the Identification Date and ending on March 31 of the following year.

     2.17 Vested Retirement Eligibility. Vested Retirement Eligibility is the attainment
of a vested interest in an Accrued Benefit. The Accrued Benefit is vested upon the earlier of:

     (a) Age and Service. The attainment of age 55 while (or prior to becoming) an Active
Participant and the completion of either ten (10) Years of Vesting Service or ten (10) Years of
Credited Service (without regard to any Additional Credit provided under Section 2.18(a) or (b));
or

     (b) Age. The attainment of age 65 while (or prior to becoming) an Active Participant.

     2.18 Year of Credited Service. A Year of Credited Service is a Year of Credited
Service determined under the Kaydon Corporation Retirement Plan, including service credited prior
to participation in this Plan, except that:

     (a) Additional Credit. For purposes of the Accrued Benefit once the individual
attains the Eligibility requirement below and for purposes of the computation of the Normal
Retirement, Early Retirement, Death, or Disability Benefit under Sections 3.1, 3.2, 3.4 and 3.5(b)
only (and not for purposes of calculating the Accrued Benefit prior to the time the individual
attains the Eligibility requirement below, calculating the Vested Retirement Benefit, or
determining eligibility for a benefit, vesting, or any other purpose), Active Participants
identified in Appendix C as potentially eligible for Additional Credit who are described in this
subsection will be credited with Years of Credited Service as provided in this subsection in
addition to the Years of Credited Service already credited to the Participant.

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     (i) Eligibility. An individual is eligible for the additional credit provided
in subsection (ii) if the individual attains while an Active Participant in this Plan Normal
Retirement Eligibility, Disability Retirement Eligibility, or Early Retirement Eligibility
and age 62, or dies while an Active Participant in this Plan with a Qualifying Spouse who is
eligible for a benefit under Section 3.5(b).

     (ii) Amount of Credit. The number of additional Years of Credited Service
credited is equal to the Active Participant=s Years of Credited Service actually
earned under the Kaydon Corporation Retirement Plan or credited under Section 3.7 of this
Plan (excluding, for example, Years of Credited Service imputed under the terms of that Plan
or this Plan, other than in accordance with Section 3.7 of this Plan).

     (iii) Removal. An individual may be removed from the list of Active
Participants identified in Appendix C as potentially eligible for Additional Credit at any
time prior to the earlier of attainment of the Eligibility requirement, above, and the date
which is six months prior to the time the provisions of Section 3.8 of this Plan have
operated with respect to the individual. Subject to that limitation, that removal may occur
in the discretion of the Board of Directors or the Committee.

     (b) Discretionary Credit. The Committee also has the authority, in its complete and
absolute discretion, to grant on a case by case basis additional Years of Credited Service in
addition to the Years of Credited Service already credited to the participant. Any Years of
Credited Service granted under this subsection (b) after October 1, 2004 may be granted for
purposes of the computation of the Normal Retirement, Early Retirement, Vested Retirement, Death,
or Disability Benefit under Sections 3.1, 3.2, 3.3, 3.4 and 3.5(b) only (and not for purposes of
determining eligibility for a benefit, vesting, or any other purpose that could have the effect of
accelerating the time of payment of benefits under the Plan).

-8-

 

     (c) Maximum. In every case, total Years of Credited Service (including any Additional
Credit under subsection (a) and any Discretionary Credit under subsection (b)) are limited to 30.

     (d) Limitation. Years of Credited Service are not credited under this Plan after an
individual ceases to be an Active Participant in this Plan.

     2.19 Year of Vesting Service. A Year of Vesting Service is a Year of Vesting Service
determined under the Kaydon Corporation Retirement Plan, except that Years of Vesting Service are
not credited under this Plan after an individual ceases to be an Active Participant in this Plan.

ARTICLE III

Benefits

     3.1 Normal Retirement Benefit. An Active Participant who attains Normal Retirement
Eligibility is entitled to the following benefit, calculated in the Basic form, payable beginning
on the first day of the month following separation from service at or after attainment of Normal
Retirement Eligibility (or later, as required by Section 4.1(d)). The benefit is one percent (1%)
of Average Monthly Compensation plus fifty-eight hundredths percent (.58%) of Average Monthly
Compensation in excess of Covered Compensation, multiplied by Years of Credited Service (to a
maximum of 30 years), less the Participant’s accrued benefit under the Kaydon Corporation
Retirement Plan, calculated in the Basic Form, as if payable beginning at the same date.

     3.2 Early Retirement Benefit. A participant who retires and separates from service
after attaining Early Retirement Eligibility is entitled to a benefit computed in the same manner
as the Normal Retirement Benefit, payable beginning on the first day of the month following the
later of separation from service and attainment of age 65 (or later, as

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required by Section 4.1(d)). By a Complying Election made on or before the later of the date
that is thirty days after the an individual first becomes an Active Participant in this Plan and
December 31, 2007, however, each participant may begin the payment of benefits following
retirement and separation from service after attaining Early Retirement Eligibility. In that case,
the benefit is calculated by subtracting from the Actuarial Equivalent (determined under Appendix
E) of the Participant’s Accrued Benefit (calculated without the offset of the benefit under the
Kaydon Corporation Retirement Plan) the Participant’s actuarially adjusted benefit under the Kaydon
Corporation Retirement Plan from time to time.

     3.3 Vested Retirement Benefit. A participant who retires and separates from service
after attaining Vested Retirement Eligibility is entitled to the following benefit, calculated in
the Basic form, payable beginning on the first day of the month following the later of separation
from service and attainment of age 65 (or later, as required by Section 4.1(d)). The benefit is
calculated under the formula provided in Section 3.1.

     3.4 Disability Benefit. A participant who attains Disability Retirement Eligibility
and retires due to Disability is entitled to the individual’s Accrued Benefit, payable beginning on
the first day of the month following the later separation from service and attainment of age 65 (or
later, as required by Section 4.1(d)), calculated based on the Years of Credited Service the
Participant would have completed had employment continued to Normal Retirement Eligibility (with
additional Years of Credited Service credited under Section 2.18(a), if applicable, based only on
the individual’s actual Years of Credited Service) and Average Monthly Compensation determined on
the first day of the month coincident with or next following the occurrence of the Disability,
reduced by any benefits being received by the participant under the Employer’s long term disability
insurance program.

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     (a) Notice. A participant whose employment terminated as the result of a permanent
disability must advise the Committee within sixty (60) days should payment of Social Security
disability insurance benefits be discontinued.

     (b) Examination. The Committee may require any participant whose employment
terminated as the result of a permanent disability to provide evidence the Committee considers
appropriate verifying the participant’s continued eligibility for disability benefits under this
Plan.

     (c) Effect of Discontinuance. If the permanent disability of a participant ceases,
the Disability Benefit shall also cease and the participant shall receive no further Years of
Credited Service unless, in the case of a participant receiving an unreduced Disability Benefit,
the participant returns to the employ of an Employer within thirty (30) days after the cessation of
disability.

     (i) Special Credit. In that event, the participant shall receive Years of
Credited Service for the entire period of permanent disability.

     (ii) Other. If the participant does not return to the employ of an Employer
within thirty (30) days after the cessation of disability, or in the case of a participant
receiving a reduced Disability Benefit, the participant shall not receive any Years of
Credited Service for the period of permanent disability and shall be entitled only to the
benefit, if any, applicable on the date of commencement of the permanent disability,
determined as if employment with the Employers had terminated as of that date.

     3.5 Death Benefit. Death Benefits are payable only under this Section.

     (a) Non-Eligible. If an individual dies before vesting, no benefit is payable under
this Plan.

     (b) Eligible Death. The Qualifying Spouse (as defined in the Kaydon Corporation
Retirement Plan) of a participant who dies after vesting but before benefits are

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payable is entitled to the Spousal Survivor Annuity. If the Spousal Survivor Annuity is not
payable, no benefit is payable under this Plan.

     (i) Spousal Survivor Annuity. The Spousal Survivor Annuity is an equal monthly
benefit for the Qualifying Spouse’s life equal to the Qualifying Spouse’s benefit under the
Joint and Spousal Survivor form of benefits (as defined in the Kaydon Corporation Retirement
Plan) (with additional Years of Credited Service under Section 2.18(a), if applicable) less
the Spousal Survivor Annuity benefit payable under the Kaydon Corporation Retirement Plan
from time to time.

     (ii) Payment. The Spousal Survivor Benefit is payable at the earliest time
payment of the Spousal Survivor Annuity benefit under the Kaydon Corporation Retirement Plan
(as it existed on December 31, 2004) could commence and is not payable if the spouse does
not survive until the actual commencement date. The benefit is actuarially reduced as
provided in Appendix E.

     (c) Post-Benefit Death. The designated beneficiary of a participant who dies after
benefits are payable is entitled to a continuation of payment under the elected payment form if the
participant was properly receiving payments in the Joint and Spousal Survivor form, the Joint and
Survivor form, or the Period Certain form.

     3.6 Benefit Limitations. Notwithstanding any other provision of the Plan (except as
provided in this subsection (a)):

     (a) Forfeiture of Vested Benefits. An individual forfeits all amounts payable under
the Plan, whether or not vested and whether or not benefits have yet commenced, if the individual:

     (i) For Cause. Is discharged For Cause;

     (ii) Employment. Is employed other than by Kaydon Corporation or one of its
wholly-owned subsidiaries or is self-employed, in any capacity to any

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extent, prior to attainment of age 65, without prior written approval of the
Committee or the Board of Directors; or

     (iii) Compete. Is employed or is self-employed, in any capacity to any extent,
at any age, in any industry determined by the Committee or the Board of Directors in its
discretion to be an industry in which Kaydon Corporation or any of its subsidiaries
competes.

     Subsection (ii) shall not apply if Section 3.8 operates with respect to the individual. For
purposes of this Plan, discharge is For Cause if the participant, in connection with the
participant’s duties as an employee of the Employer or any of its affiliates, committed a fraud or
any felony, engaged in deliberate, willful or gross misconduct, or committed any other act which
causes or may reasonably be expected to cause substantial injury to Kaydon or any of its
affiliates. For purposes of clarification, this use of this For Cause standard for discharge
affects the participant’s entitlement to benefits under this Plan only and does not generally limit
the ability of Kaydon or other employer to terminate participant’s employment for any reason or for
no reason at all.

     (b) Receipt of Benefit. Receipt of any benefit under the Plan fully terminates the
employment relationship with the Employers.

     (c) Kaydon Corporation Retirement Plan Benefit. Except where Section 3.8 operates,
an individual is entitled to a benefit under this Plan only if the individual has accrued a benefit
under the Kaydon Corporation Retirement Plan or would have accrued a benefit under that Plan except
that the individual’s Employer did not maintain that Plan.

     (d) Single Benefit. A participant is eligible for only one (1) type of benefit under
the Plan. The receipt of a Plan benefit during any month precludes payment of another type of
benefit for the same month. Under no circumstances will the Plan pay duplicate benefits with
respect to the same participant or surviving spouse benefits in excess of the actuarial present
value of the benefits described in this Article III determined as of the earlier of the
commencement of benefits or the date of the participant’s death.

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     (e) Employment After Benefit Commencement. Benefit payments under the Plan cease and
are forfeited during any period of reemployment with an Employer or a prior Employer and during any
other period during which benefits under the Kaydon Corporation Retirement Plan are suspended.

     (f) Withholding and Payroll Taxes. Benefit payments shall be reduced as determined in
the sole discretion of the Employer for any withholding for federal, state and local income,
employment and other taxes required to be withheld by the Employer in connection with the benefits
paid under this Plan.

     3.7 Special Transfer Employee Rule. An Active Participant who is employed while an
Active Participant by a subsidiary of Kaydon Corporation which does not maintain the Kaydon
Corporation Retirement Plan:

     (a) Service. Is credited with Years of Vesting Service and Years of Credited Service
under this Plan as though the subsidiary had maintained the Kaydon Corporation Retirement Plan
during the Active Participant’s employment by the subsidiary as an Active Participant; and

     (b) Benefit. Receives a benefit under this Plan calculated taking that imputed
service into account for purposes of this Plan. The benefit offset under this Plan is then
calculated based on the greater of:

     (i) Pension Benefit. The participant’s benefit under the Kaydon Corporation
Retirement Plan based on the aggregate of the participant’s actual service under that Plan
and imputed service under Section 3.7(a) of this Plan; or

     (ii) Other Benefit. The sum of the participant’s actual benefit under the
Kaydon Corporation Retirement Plan, the participant’s actual benefit under any other Kaydon
Corporation or other subsidiary defined benefit plan, and the Actuarial Equivalent of the
participant’s actual benefit under any other Kaydon Corporation or other subsidiary defined
contribution plan.

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     3.8 Change in Control Override. To the extent a participant is a party to an
effective Change in Control Agreement with an Employer which explicitly provides for amendment of
this Plan as to the participant, upon a termination of employment triggering the operation of that
Agreement as to participant, except as provided in this Section 3.8, this Plan shall be deemed
amended as to that participant to the extent provided in the Change in Control Agreement.
Notwithstanding that general rule, the Change in Control Agreement may not amend this Plan in a
manner that causes this Plan to violate Section 409A of the Code in form or operation.

ARTICLE IV

Distribution

     4.1 Time and Method of Payment. Except as otherwise explicitly provided in this
Plan, benefits under this Plan will be paid (other than in the case of death of the participant) in
the form of payment elected by the participant in a written Complying Election made on or before
the later of the date that is thirty days after the an individual first becomes an Active
Participant in this Plan and December 31, 2007, commencing on the first day of the month following
attainment of age 65 (or as otherwise provided and limited by this Plan).

     (a) Automatic Change of Form. Notwithstanding the participant’s written election as
provided above, to the extent permitted by regulations under Section 409A of the Code:

     (i) Change in Form of Annuity. At any time prior to the date an annuity
payment has been made to the participant this Plan, the participant may elect to change the
Basic or Joint and 100% Survivor annuity form of payment previously elected by the
participant to the other of the two forms of payment, provided that the annuities are
actuarially equivalent applying reasonable actuarial assumptions.

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     (ii) Absence of Surviving Spouse. If, on the day before payment is scheduled
to begin in the Joint and Spousal Survivor annuity form under this Plan, the participant has
no Qualifying Spouse (other than as a result of divorce), the participant shall be deemed to
have elected payment in the Basic form, provided that the Joint and Spousal Survivor annuity
and the Basic annuity are actuarially equivalent applying reasonable actuarial assumptions.

     (b) Other Change of Circumstances. Once payments have begun, no method of payment may
be revoked or modified, nor the benefit increased, by reason of a subsequent divorce or death of
the spouse of a participant before that of the participant or by reason of the participant’s actual
retirement after benefits have begun because of the participant’s attainment of age 702.

     (c) No Acceleration. Once elected, the time and manner of payment under this Plan
may not be accelerated except as permitted under Sections 4.7 and 4.8.

     (d) Delay in Payment to Specified Employees. Notwithstanding the remaining
provisions of this Plan, no payment may be made to a Specified Employee (as defined in Section
2.16) during the first six months following the Specified Employee’s separation from service with
the Employer if the payment is due to the Specified Employee as a result of a separation from
service with the Employer. Any such payments shall be accumulated and paid to the Specified
Employee, without interest, on the first day of the seventh month following the date of the
separation from service.

     4.2 Method of Payment. Subject to Section 4.1, the participant may elect that
benefits be paid in one (1) of the following forms:

     (a) Basic. An immediate, equal monthly benefit for the participant’s life. The Basic
form automatically applies if the participant does not have a Qualifying Spouse (defined as
provided in the Kaydon Corporation Retirement Plan, but without the one-year of marriage
requirement) and fails to adequately elect another form of payment.

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     (b) Joint and Spousal Survivor. An immediate, reduced equal monthly benefit for the
participant’s life and, if the participant is survived by a Qualifying Spouse (defined as provided
in the Kaydon Corporation Retirement Plan, but without the one-year of marriage requirement) to
whom the participant is married at the date of death or who is treated as a Qualifying Spouse under
a Qualified Order (also as defined in the Kaydon Corporation Retirement Plan), fifty percent (50%)
of the amount continued for that spouse’s life. The Joint and Spousal Survivor form automatically
applies if the participant has a Qualifying Spouse (as defined for purposes of this Plan) and fails
to effectively elect another form of payment.

     (c) Joint and Survivor. An immediate, reduced equal monthly benefit for the
participant’s life and, if the participant is survived by an individual Designated Beneficiary
(defined as provided in the Kaydon Corporation Retirement Plan), an equal (100%) or lesser (50% or
66-2/3%) amount continued for that beneficiary’s life.

     (d) Period Certain. An immediate, reduced equal monthly benefit for the participant’s
life, and if the participant dies before the end of a period certain of ten years, an equal amount
continued to the Designated Beneficiary (or successor) for the remainder of that period certain.
The ten year period certain may not be longer than the applicable life expectancy, determined
without recalculation.

     (e) Lump Sum. To the extent provided in a governing Change in Control Agreement or
elected by the participant as provided here, payment of the Actuarial Equivalent of the
participant’s vested Accrued Benefit within one (1) taxable year of the recipient. A participant
may elect in a written Complying Election made on or before the later of the date that is thirty
days after the an individual first becomes an Active Participant in this Plan and December 31,
2007 that the participant’s entire vested Accrued Benefit will be paid to the participant in a lump
sum upon the participant’s separation from service if the Actuarially Equivalent lump sum is less
than $10,000.

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     Each optional form and time of payment of benefits must be the Actuarial Equivalent of
the benefit payable under the Basic form. A married participant may elect a form of payment other
than the Joint and Spousal Survivor form only with the written consent of the participant’s spouse.

     4.3 Designation of Beneficiary. The beneficiary or contingent beneficiary designated
to receive amounts payable under the Plan (other than the Spousal Survivor Annuity or the Spousal
Survivor portion of the Joint and Spousal Survivor Annuity) in the event of the participant’s death
is the same beneficiary and contingent beneficiary, respectively, applicable to the participant
from time to time under the Kaydon Corporation Retirement Plan.

     4.4 Claims Procedure. A participant or beneficiary, the Committee and the Board of
Directors must observe the following procedures for claims to benefits.

     (a) Claim. If a participant, beneficiary or legal representative asserts that a
benefit which is payable has not been paid in a timely manner, the individual must file an
Application for Distribution with the Committee. The Committee must grant or deny the request
within ninety (90) days after receipt unless special circumstances require an extension of time.
The extension must not exceed an additional ninety (90) days. The Committee must notify the
applicant in writing of the extension and the reasons for the extension.

     (b) Denial of Claim. If a claim is denied, the Committee must provide to the
applicant a written notice containing the reason for the denial. If notice of a denial of claim or
an extension of time is not received by the applicant within ninety (90) days, the claim is deemed
denied.

     (c) Employer Review. Within sixty (60) days after a denial is received, the applicant
may request a review upon written application to the Board of Directors. The

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applicant may submit issues and comments in writing to the Board. The Board must make a
decision on review and notify the applicant of the decision within ninety (90) days of receipt of
the request for review unless circumstances require an extension of time. The extension may not
exceed an additional ninety (90) days.

     (i) Pre-Change in Control. Prior to a Change in Control (as defined in a
Change in Control Agreement affecting a participant), except during any period of time in
anticipation of a Change in Control, the Board has the duty and power in this regard to
exercise discretionary authority to construe and interpret the Plan and decide all questions
of eligibility for benefits. The decision of the Board upon review is final and binding on
the applicant unless the applicant establishes that the decision of the Board is arbitrary
and capricious.

     (ii) Post-Change in Control. After such a Change in Control and during any
period of time in anticipation of a Change in Control:

     (A) Interpretation. The Board=s construction and interpretation
of the Plan and its decisions regarding eligibility for benefits with respect to the
affected participant must be reasonable and consistent with the spirit and intent of
the Plan; and

     (B) Standard. The decision of the Board upon review with respect to
the affected participant is subject to de novo review.

     4.5 Facility of Payment. A payment made under this section fully discharges the
Employer and the Committee from all future liability with respect to the payment.

     (a) Incapacity. If a person entitled to payment is legally, physically or mentally
incapable of receiving or acknowledging payment, the Committee may direct payment: directly to the
person; to the person’s legal representative; to the spouse, child or relative by blood or marriage
of the person; to the person with whom the person resides; or by

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expending the payment directly for the benefit of the person. A payment made other than to
the person is intended to be used for the person’s exclusive benefit.

     (b) Legal Representative. The Committee is not required to commence probate
proceedings or to secure the appointment of a legal representative.

     (c) Determinations. The Committee may act upon affidavits in making any
determination. The Committee, in relying upon affidavits or having made a reasonable effort to
locate any person entitled to payment, is authorized to direct payment to a successor beneficiary
or another person. A person omitted from payment has no rights on account of payments so made.

     (d) Anti-Escheat. If the Committee cannot locate a person entitled to payment, the
amount is a forfeiture which is reinstated if a claim is made within the applicable limitations
period by a person entitled to payment.

     4.6 Offset. The Committee shall offset any benefit by the value of benefits received
before reemployment or when or to the extent benefits should not have been paid. In addition, in
all cases the benefit payable under this Plan is reduced by the benefit payable under the Kaydon
Corporation Retirement Plan.

     4.7 Distribution in the Event of Taxation. If, as a result of a failure of this Plan
to meet the requirements of Section 409A of the Code, all or any portion of the participant’s
benefit under this Plan becomes taxable to the participant prior to receipt, the participant may
request a distribution of assets sufficient to meet the participant’s tax liability (including
additions to tax, penalties and interest), but not in excess of the amount required to be included
in income as a result of the failure to comply with Section 409A.

     (a) Calculation. Upon receipt of the request, the Employer shall distribute to the
participant immediately available funds in an amount equal to the participant’s federal, state and
local tax liability associated with such taxation (not to exceed the lesser of the

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participant’s Vested Accrued Benefit under the Plan and the amount required to be included in
income as a result of the failure to comply with Section 409A).

     (b) Timing. The tax liability distribution shall be made within two and one-half
months after the request unless the rules of Section 4.4 require a longer time for processing.

     (c) Effect. The distribution shall affect and reduce the participant’s Accrued
Benefit and the benefits to be paid under this Plan.

     4.8 Permissible Distributions. In addition, all or any portion of a participant’s
benefit under this Plan may be distributed in an amount sufficient to meet the participant’s needs
as follows:

     (a) Conflicts of Interest. To comply with a certificate of divestiture as defined in
Code Section 1043(b)(2).

     (b) Payment of Taxes. To pay Federal Insurance Contributions Act tax under Code
Sections 3101, 3121(a) and 3121(v)(2) on amounts payable under this Plan and income tax at source
on wages under Code Section 3401 or applicable state, local or foreign tax laws based on the FICA
amount.

     (c) Plan Termination. To provide an accelerated payment of the participant’s benefit
under this Plan upon the termination of this Plan in accordance with Code Section 409A.

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ARTICLE V

Administration

     5.1 Committee. The Committee has responsibility for general administration of the
Plan.

     (a) Authority. The Committee has the duty and power to:

     (i) Construction. Exercise discretionary authority to construe and interpret
the Plan and decide all questions of eligibility for participation and benefits;

     (ii) Procedures. Prescribe procedures and forms for the payment of benefits;
and

     (iii) Benefit Authorization. Determine entitlement to and the amount of
benefits and authorize benefit payments.

     (b) Procedure and Action. The Committee may elect one of its members as chairperson
and may designate a secretary. The Committee must keep a brief record of all meetings. Any
delegation of duties by the Committee must state the scope of the delegation with reasonable
specificity. The Committee acts by a majority of its members, either by vote at a meeting or by
signature to a writing. Action by the Committee must be evidenced by written and duly executed
instrument.

     (c) Finality. Except as provided in subsection (d), the decision or action of the
Committee with respect to any question arising out of or in connection with the administration,
interpretation and application of the Plan is final and conclusive and binding on all persons
having any interest in the Plan.

     (d) Post-Change in Control. After a Change in Control (as defined in a Change in
Control Agreement affecting a participant) or during any period of time in anticipation of a Change
in Control:

     (i) Interpretation. The Committee=s construction and interpretation of
the Plan and its decisions regarding eligibility for benefits with
respect to the affected

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participant must be reasonable and consistent with the spirit and intent of
the Plan; and

     (ii) Standard. The decisions of the Committee with respect to the affected
participant are subject to de novo review.

     5.2 Limitation of Liability and Indemnification. As a condition of participation in
the Plan, each participant agrees that neither the Employers’ officers and agents, the Committee,
the Board of Directors, nor their individual members shall in any way be subject to any suit,
litigation, or legal liability for any cause or reason in connection with the Plan or its
operation, and each participant releases the Employers’ officers and agents, the Committee, the
Board of Directors and their individual members from any and all such liability or obligation. The
Board of Directors, the Committee and their respective individual members shall not be liable for
any act, omission, determination, construction, or communication made by that individual or any
other party. Each shall be indemnified by Kaydon Corporation against any and all liabilities
arising by reason of any act or failure to act made in good faith pursuant to the provisions of the
Plan, including expenses reasonably incurred in the defense of any claim of liability.

ARTICLE VI

Amendment and Termination of Plan

     6.1 Amendment or Termination. The Board of Directors of Kaydon Corporation may amend
or terminate the Plan at any time and the Board of Directors of each Employer may amend or
terminate the Plan as to that Employer at any time. Except as explicitly limited, no individual
has any right to continuation of the Plan, to continued participation in the Plan, or to continued
accrual under the Plan.

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     (a) Limitation. No amendment or termination may, without the consent of the
participant, modify Section 4.4(c)(ii) or 5.1(d) of this Plan or retroactively decrease the vested
Accrued Benefit of a participant:

     (i) Regular Vesting. Who completed ten (10) Years of Credited Service (without
regard to any Additional Credit provided under Section 2.18(a) or any Discretionary Credit
provided under Section 2.18(b)) or ten (10) Years of Vesting Service and attained age 55
while (or prior to becoming) an Active Participant and prior to the amendment or
termination;

     (ii) Age Vesting. Who attained age 65 while (or prior to becoming) an
Active Participant and prior to the amendment or termination; or

     (iii) Change in Control. Upon or after the occurrence of a Change in Control
or in anticipation of a Change in Control, if the participant is at that time a party to an
effective Change in Control Agreement.

     (b) Benefits, Rights and Features. No amendment or termination upon or after the
occurrence of a Change in Control or in anticipation of a Change in Control may, without the
consent of the participant, adversely affect the benefits, rights or features of this Plan
(determined in accordance with Section 411(d) of the Code and applicable regulations) at the time
of the Change in Control (or the action in anticipation of a Change in Control) with respect to a
participant who is at that time:

     (i) Change in Control. A party to an effective Change in Control Agreement;
and

     (ii) This Plan. An Active Participant in this Plan.

     (c) Automatic. Subject to subsections (a) and (b), above, any freeze of benefit
accrual or termination of the Kaydon Corporation Retirement Plan shall automatically effect a
freeze or termination of this Plan, as the case may be.

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     6.2 Change in Control Agreement. Subject to the limitations of Section 3.8, this Plan
may also be amended as to a participant by an effective Change in Control Agreement or other
written document which explicitly amends this Plan and which is signed by the participant and
authorized representatives of Kaydon Corporation or the participant=s Employer.
Notwithstanding that general rule, the Change in Control Agreement may not amend this Plan in a
manner that causes this Plan to violate Section 409A of the Code in form or operation.

ARTICLE VII

Miscellaneous

     7.1 Nonassignability. Benefits are not subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, attachment, garnishment, execution, or levy
(Assignment), before actual receipt, by creditors of the participant or the participant’s
beneficiary. Any assignment which violates this section is void. The right to receive a benefit is
not an asset for insolvency or bankruptcy.

     7.2 Employment Rights Not Enlarged. The Plan does not create any employment rights or
restrict an Employer’s right to discharge an employee.

     7.3 Participants’ Rights Limited. The Plan does not give any participant or
beneficiary: any interest in any Employer’s assets, business or affairs; the right to question any
Employer action or policy; or the right to examine Employer books and records. The rights of all
participants are limited to the right to receive payment of benefits when due. The Employer’s
obligation under the Plan is simply an unfunded and unsecured promise to pay money in the future
and its assets remain the general, unpledged and unrestricted assets of the Employer.
Notwithstanding these limits and any other provision of this Plan,

-25-

 

the Employer shall not be a party to any merger, consolidation, or reorganization unless its
obligations under this Plan are expressly assumed by its successor. This Plan shall inure to the
benefit of and shall be binding upon the successors and assigns of the Employer and each
participant.

     7.4 Interpretation and Construction. The use of the singular includes the plural
where applicable, and vice versa. The headings in the Plan do not limit or extend the provisions
of the Plan. Capitalized terms, except where capitalized solely for grammar, have the meanings as
provided in the Plan. If a provision is unenforceable in a legal proceeding, the provision is
severed only for that proceeding.

     7.5 Governing Law. The Plan is governed by the applicable laws of the United States
of America (including the Code, ERISA, securities law, labor law, age discrimination law, and civil
rights law) and, to the extent not preempted, by the laws of Florida.

     7.6 Arbitration. Any claim which cannot be resolved under this Plan shall be
submitted to arbitration.

     (a) Rules. The arbitration shall be conducted by the American Arbitration Association
under its commercial arbitration rules within the county where the Employer maintains its
registered office.

     (b) Award. The Arbitrator’s decision shall be embodied in an award which shall be
final and binding on the parties. In making an award, the arbitrator may include any remedy
contemplated by this Agreement and shall allocate the fees and expenses of the arbitration.

-26-

 

	 	 	 	 	 
	KAYDON CORPORATION and	 	 
	KAYDON RING & SEAL, INC.	 	 
	 
	 	 	 	 
	By
	 	/s/ Brian P. Campbell	 	 
	 

	 	 

Brian P. Campbell	 	 
	 

	 	The Chairman and Chief Executive Officer	 	 
	 

	 	of Kaydon Corporation and Vice-President	 	 
	 

	 	of Kaydon Ring & Seal, Inc.	 	 
	 
	 	 	 	 
	And
	 	/s/ John F. Brocci	 	 
	 

	 	 

John F. Brocci	 	 
	 

	 	The Secretary of Kaydon Ring & Seal, Inc.	 	 
	 

	 	and of Kaydon Corporation	 	 

-27-

 

APPENDIX A

OTHER EMPLOYERS

     Kaydon Ring & Seal, Inc.

 

 

APPENDIX B

ACTIVE PARTICIPANTS

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Effective Date of
	 	 	 	 	Effective Date of	 	Cessation of
	Name	 	Employer	 	Active Participation	 	Active Participation
	 
	 	 	 	 	 	 
	John F. Brocci

	 	Kaydon Corporation
	 	January 1, 1994	 	 
	Brian P. Campbell

	 	Kaydon Corporation
	 	October 1, 1998	 	 
	Arthur Ridler

	 	Kaydon Ring & Seal, Inc.
	 	January 1, 1994	 	 

 

 

APPENDIX C

ADDITIONAL CREDIT UNDER SECTION 2.18(a)

	 	 	 	 	 
	 	 	 	 	Effective Date of
	 	 	 	 	Eligibility for Additional Credit
	Name	 	Employer	 	Under Section 2.18(a)
	 
	 	 	 	 
	John F. Brocci

	 	Kaydon Corporation
	 	August 1, 1998
	Lawrence J. Cawley

	 	Kaydon Corporation
	 	August 1, 1998
	Brian P. Campbell

	 	Kaydon Corporation
	 	October 1, 1998

 

 

APPENDIX D

DISCRETIONARY CREDIT UNDER SECTION 2.18(b)

	 	 	 	 	 	 	 
	 	 	 	 	Effective Date of	 	 
	 	 	 	 	Eligibility for Discretionary Credit	 	 
	Name	 	Employer	 	Under Section 2.18(b)	 	Amount of Credit
	 
	 	 	 	 	 	 
	Brian P. Campbell

	 	Kaydon Corporation
	 	October 1, 1998
	 	10 Years

 

 

APPENDIX E

ACTUARIAL FACTORS

1. Time of Payment Actuarial Equivalence. Actuarially reduced from age 62 based on:

     (a) Interest Rate. 7.5%

     (b) Mortality. 1983 Group Annuity Mortality (GAM) with annuity values based on 75%
male and 25% female mortality.

2. Form of Payment Actuarial Equivalence.

     (a) Interest Rate. 7.5%

     (b) Mortality. 1983 Group Annuity Mortality (GAM) with annuity values based on 75%
male and 25% female mortality.

     (c) Lump Sum Override. For purposes of determining lump sum actuarial equivalence
under this Plan, the interest rate, mortality and other factors applicable for purposes of
determining lump sum actuarial equivalence under the Kaydon Corporation Retirement Plan from time
to time and, to the extent not addressed by that Plan, the applicable mortality table and
applicable interest rate as described in Code Section 417(e)(3) shall be used instead of the
interest rate and mortality factors provided in this Appendix E.

3. Other. For any other purpose for which Actuarial Equivalence is specified:

     (a) Interest Rate. 7.5%

     (b) Mortality. 1983 Group Annuity Mortality (GAM) with annuity values based on 75%
male and 25% female mortality.

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