Document:

exv10w12

 

EXHIBIT 10.12

KAYDON CORPORATION

2003 NON-EMPLOYEE DIRECTORS EQUITY PLAN

(Amended and Restated Effective October 25, 2007)

     1. Establishment, Purpose and Term of Plan. This Kaydon Corporation 2003 Non-Employee
Directors Equity Plan (the “Plan”) shall be effective as of the date of its approval by the
stockholders of the Company (the “Effective Date”). The purpose of this Plan is to advance the
interests of the Company and its stockholders by providing an incentive to attract and retain
highly qualified persons to serve as Non-Employee Directors of the Company and by creating
additional incentives for Non-Employee Directors to promote the growth and profitability of the
Company. This Plan shall continue in effect until the earlier of its termination by the Board or
the date on which all of the shares of Stock available for issuance under the Plan have been issued
and all restrictions on such shares under the terms of the Plan and the agreements evidencing
Options granted under the Plan have lapsed.

     2. Definitions and Construction. Whenever used herein, the following terms shall have their
respective meanings set forth below:

“Board” means the Board of Directors of the Company.

“Change in Control” means the occurrence of any of the following events:

     (a) 50% Stock. The acquisition, by a person or Persons Acting as a Group, of
stock of the Company that together with stock held by such person or group constitutes more
than 50% of the total fair market value or total voting power of the stock of Company;

     (b) 35% Stock. The acquisition, by a person or Persons Acting as a Group, of
ownership of stock of the Company that constitutes 35% or more of the total voting power of
Company’s stock in a single transaction or within a twelve month period ending with the most
recent acquisition;

     (c) Directors. The majority of members of the Board being replaced during any
twelve month period by directors whose appointment or election is not endorsed by a majority
of the members of the Board prior to the date of appointment or election;

     (d) Assets. The acquisition, by a person or Persons Acting as a Group, of the
Company’s assets that have a total gross fair market value equal to or exceeding forty
percent (40%) of the total gross fair market value of Company’s assets in a single
transaction or within a twelve month period ending with the most recent acquisition. For
the purpose of this section, gross fair market value means the value of the assets of the
corporation, or the value of the assets being disposed of, determined without regard to any
liabilities associated with such assets; or

     (e) Merger. A reorganization, merger or consolidation of the Company, the
substantive effect of which is a Change in Control under any of subsections (a), (b), (c) or
(d) above, unless with or into a Permitted Successor.

 

 

     “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.

     “Committee” means the Compensation Committee of the Board, or any other committee of the Board
duly appointed to administer the Plan and having such powers as shall be specified by the Board.
Unless the powers of the Committee have been specifically limited, the Committee shall have all of
the powers of the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations
imposed by law.

     “Company” means Kaydon Corporation, a Delaware corporation, or any successor corporation
thereto.

     “Continuing Directors” are the individuals constituting the Board as of the date this Amended
and Restated Plan was adopted by the Board and any subsequent directors whose election or
nomination for election by the Company’s stockholders was approved by a vote of two-thirds of the
individuals who are then Continuing Directors, but specifically excluding any individual whose
initial assumption of office occurs as a result of either an actual or threatened election contest
(as the term is used in Rule 14a-11 of Regulation 14A issued under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the
Board.

     “Disability” means the Non-Employee Director: (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months; or (ii) is, by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous period of not less than
12 months, receiving income replacement benefits for a period of not less than 3 months under an
accident and health plan covering employees of the Company. To the extent required hereunder, the
determination of Disability shall be made by a medical board certified physician selected by the
Company and acceptable to the Non-Employee Director (or the Non-Employee Director’s legal
representative, if one has been appointed), provided such agreement as to acceptability shall not
be unreasonably withheld.

     “Employee Benefit Plan” means any plan or program established by the Company or a Subsidiary
for the compensation or benefit of employees of the Company or any of its Subsidiaries.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Excluded Holder” means any Person who at the time this Amended and Restated Plan was adopted
by the Board was the beneficial owner of 20% or more of the outstanding common stock of the
Company; or the Company, a Subsidiary or any Employee Benefit Plan of the Company or a Subsidiary
or any trust holding such common stock or other securities pursuant to the terms of an Employee
Benefit Plan.

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     “Fair Market Value” means, as of any date, if there is then a public market for the Stock, the
closing price of the Stock as reported on the New York Stock Exchange (“NYSE”) or such other
national or regional securities exchange or market system constituting the primary market for the
Stock. If the relevant date does not fall on a day on which the Stock is trading on NYSE or other
national or regional securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded prior to the relevant
date. If there is then no public market for the Stock, the Fair Market Value on any relevant date
shall be as determined by the Committee without regard to any restriction other than a restriction
which, by its terms, will never lapse.

     “Option” means a right to purchase Stock, subject to adjustment as provided in Section 4(b),
pursuant to the terms and conditions of this Plan.

“Optionee” means a person who has been granted one or more Options.

     “Option Agreement” means a written agreement between the Company and an Optionee setting forth
the terms, conditions and restrictions of an Option granted to an Optionee.

     “Non-Employee Director” means a Director of the Company who meets the qualifications set forth
in Rule 16b-3(b)(3)(i).

     “Permitted Successor” means a corporation which, immediately following the consummation of a
transaction specified in the definition of “Change in Control” above, satisfies each of the
following criteria:

     (a) Stock. Sixty percent or more of the outstanding common stock of the
corporation and the combined voting power of the outstanding securities of the corporation
entitled to vote generally in the election of directors (in each case determined immediately
following the consummation of the applicable transaction) is beneficially owned, directly or
indirectly, by all or substantially all of the Persons who were the beneficial owners of
Company’s outstanding common stock and outstanding securities entitled to vote generally in
the election of directors (respectively) immediately prior to the applicable transaction;

     (b) Limitation. No Person other than an Excluded Holder beneficially owns,
directly or indirectly, 20% or more of the outstanding common stock of the corporation or
the combined voting power of the outstanding securities of the corporation entitled to vote
generally in the election of directors (for these purposes the term Excluded Holder shall
include the corporation, any subsidiary of the corporation and any Employee Benefit Plan of
the corporation or any such subsidiary or any trust holding common stock or other securities
of the corporation pursuant to the terms of any such Employee Benefit Plan); and

     (c) Board. At least a majority of the board of directors is comprised of
Continuing Directors.

     “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Exchange Act.

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     “Persons Acting as a Group” means owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock (or assets), or similar business transaction with
the Company. If a person, including an entity, owns stock in both corporations that enter into a
merger, consolidation, purchase or acquisition of stock (or assets), or similar transaction, such
shareholder is considered to be acting as a group with other shareholders in a corporation prior to
the transaction giving rise to the change and not with respect to the ownership interest in the
other corporation. Persons will not be considered to be acting as a group solely because they
purchase or own stock of the same corporation at the same time or as a result of the same public
offering, or purchase assets of the same corporation at the same time.

     “Restricted Stock” means any shares of Stock granted under Section 5(c) of this Plan.

     “Restricted Stock Agreement” means a written agreement between the Company and a Non-Employee
Director setting forth the terms, conditions and restrictions relating to Shares of Restricted
Stock granted to such director.

     “Retirement” means a voluntary Termination of Service by a Non-Employee Director that occurs
on or after the director’s sixty-fifth (65th) birthday.

     “Rule 16b-3” means Rule 16b-3 as promulgated under the Exchange Act, as amended from time to
time, or any successor rule or regulation.

     “Stock” means the common stock, par value $0.10 per share, of the Company, as adjusted from
time to time in accordance with
Section 4(b).

     “Subsidiary” means any corporation or other entity of which 50% or more of the outstanding
voting stock or voting ownership interest is directly or indirectly owned or controlled by the
Company or by one or more Subsidiaries of the Company.

     “Termination of Service” means a cessation of the director’s service on the Board for any
reason, including, but not limited to, a cessation of service due to resignation, death,
Disability, Retirement or non-reelection to the Board.

     3. Administration. This Plan shall be administered by the Committee. All questions of
interpretation of the Plan or of any Option or Restricted Stock shall be determined by the
Committee, and such determinations shall be final and binding upon all persons having an interest
in the Plan or such Option or Restricted Stock. Except as otherwise provided herein, the Committee
shall have no authority, discretion, or power to (a) select the Non-Employee Directors who will
receive Options, (b) set the exercise price of the Options, (c) determine the number of shares of
Stock to be subject to an Option, (d) determine the number of shares of Restricted Stock to be
granted, (e) determine the time at which an Option or shares of Restricted Stock shall be granted,
(f) establish the duration of an Option, or (g) alter any other terms or conditions specified in
the Plan, except in the sense of administering the Plan subject to the provisions of the Plan.

     4. Shares Subject to Plan.

     (a) Maximum Number of Shares Issuable. Subject to adjustment as provided in Section
4(b), the maximum aggregate number of shares of Stock that may be

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issued under the Plan, pursuant to Options or in the form of Shares of Restricted Stock
awarded hereunder, shall be three hundred thousand (300,000) and shall consist of authorized
but unissued shares or reacquired shares of Stock or any combination thereof. If an
outstanding Option for any reason expires or is terminated or canceled or if shares of
Restricted Stock are forfeited for any reason, the shares of Stock allocable to the
unexercised portion of such Option, or such forfeited shares of Restricted Stock shall again
be available for issuance under this Plan.

     (b) Adjustments for Changes in Capital Structure. In the event of any stock dividend,
stock split, reverse stock split, recapitalization, combination, reclassification or similar
change in the capital structure of the Company, appropriate adjustments shall be made in the
number and class of shares subject to this Plan, to any outstanding Options (including their
exercise price), to any previously issued shares of Restricted Stock and to the number of
Options or Shares of Restricted Stock that may be granted pursuant to Section 5. If a
majority of the shares which are of the same class as the shares that are subject to
outstanding Options are exchanged for, converted into, or otherwise become (whether or not
pursuant to a Change in Control) shares of another corporation (the “New Shares”), the
Committee may unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of shares
subject to, and the exercise price of, the outstanding Options shall be adjusted in a fair
and equitable manner as determined by the Committee, in its sole discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to
this Section 4(b) shall be rounded down to the nearest whole number, and in no event may the
exercise price of any Option be decreased to an amount less than the par value, if any, of
the stock subject to the Option.

5. Automatic Grant of Options and/or Restricted Stock.

     (a) Options. Options shall be granted only to a person who, at the time of grant, is a
Non-Employee Director. Options shall be nonstatutory stock options, which means that they
will not be treated as “incentive stock options” within the meaning of Section 422(b) of the
Code.

     (b) Initial Option Grant. Subject to execution by a Non-Employee Director of an Option
Agreement, a person who first becomes a Non-Employee Director within the six month period
immediately following an annual meeting of the Company’s stockholders shall be granted an
initial Option to purchase five thousand (5,000) shares of Stock as of the date such person
is initially elected or appointed (the “Initial Grant Date”); provided, however, that a
person serving as a director of the Company who does not qualify as an Non-Employee Director
shall not receive an initial Option in the event that such person subsequently becomes a
Non-Employee Director. In addition, a person who becomes a Non-Employee Director after the
six-month period following an annual meeting of the Company’s stockholders shall not receive
an initial Option.

     (c) Annual Option and Restricted Stock Grant. Subject to execution by a Non-Employee
Director of an Option Agreement and a Restricted Stock Agreement, each Non-Employee Director
(including any director of the Company who previously did not qualify as a Non-Employee
Director but who subsequently becomes an Non-Employee Director) who is a Non-Employee
Director on the day following the annual meeting of

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stockholders of the Company shall be granted on the day immediately following such
annual meeting of stockholders (the “Annual Grant Date”), commencing with the Annual Grant
Date in 2003, an Option to purchase three thousand five hundred (3,500) shares of Stock and
one thousand (1,000) shares of Restricted Stock.

     6. Terms and Conditions of Options. Options shall be evidenced by an Option Agreement
specifying the number of shares of Stock covered, in such form as the Committee shall from time to
time approve. Option Agreements may incorporate all or any of the terms of this Plan by reference
and shall comply with and be consistent with the following terms and conditions:

     (a) Exercise Price. The exercise price per share of Stock subject to an Option shall
be the Fair Market Value of a share of Stock on the Initial Grant Date or the Annual Grant
Date, as applicable.

     (b) Exercisability. Each Initial Option shall become exercisable as to the following
number of shares on the anniversaries of the Initial Grant Date set forth below:

	 	 	 
	Number of Shares	 	Anniversary
	1,000

	 	First anniversary of Initial Grant Date
	2,000

	 	Second anniversary of Initial Grant Date
	3,000

	 	Third anniversary of Initial Grant Date
	4,000

	 	Fourth anniversary of Initial Grant Date
	5,000

	 	Fifth anniversary of Initial Grant Date

Each Annual Option shall become exercisable as to the following number of shares on the
anniversaries of the Annual Grant Date set forth below:

	 	 	 
	Number of Shares	 	Anniversary
	700

	 	First anniversary of Annual Grant Date
	1,400

	 	Second anniversary of Annual Grant Date
	2,100

	 	Third anniversary of Annual Grant Date
	2,800

	 	Fourth anniversary of Annual Grant Date
	3,500

	 	Fifth anniversary of Annual Grant Date

Notwithstanding the foregoing, if a Non-Employee Director incurs a Termination of Service
other than due to death, Disability or Retirement, any Options that are not exercisable at
the date of such Termination of Service shall never become exercisable and shall be
immediately forfeited. If a Non-Employee Director incurs a Termination of Service due to
Disability or Retirement, any Options held by such person shall continue to become
exercisable in accordance with the foregoing schedule, but the exercise thereof shall be
subject to the provisions of Section 6(c) below, and, in addition, any Options shall be
cancelled and forfeited if the Committee at any time thereafter determines that the former
Non-Employee Director has engaged in any activity detrimental to the interests of the
Company.

     (c) Expiration of Options. Each Option shall terminate and cease to be exercisable on
the first to occur of the following events:

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     (i) the date which is the tenth (10th) anniversary of the applicable
Grant Date unless earlier terminated pursuant to clause (iii) below or pursuant to
the terms of the applicable Option Agreement;

     (ii) the expiration of one (1) month from the date of a person’s Termination of
Service for any reason other than death, Disability or Retirement; or

     (iii) the expiration of five (5) years from the date of a person’s death,
whether before or after a Termination of Service.

     (d) Acceleration of Exercisability. If an Optionee incurs a Termination of Service due
to death or dies following a Termination of Service while holding Options that are
unexercisable, then 100% of his or her Options shall immediately become exercisable. The
exercisability of Options shall also be accelerated as provided in Section 8.

     (e) Payment of Exercise Price. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check, or cash equivalent,
(ii) by tender to the Company of
shares of Stock owned by the Optionee having a Fair Market Value not less than the exercise
price or (iii) by any combination thereof. Notwithstanding the foregoing, an Option may not
be exercised by tender to the Company of shares of Stock to the extent such tender of Stock
would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. Unless otherwise provided by the Board,
an Option may not be exercised by tender to the Company of shares of Stock unless such
shares either have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company.

     (f) Tax Withholding. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from
the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value
equal to all or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Company with respect to such Option or the shares acquired upon
exercise thereof. Alternatively or in addition, in its sole discretion, the Company shall
have the right to require the Optionee to make adequate provision for any such tax
withholding obligations of the Company arising in connection with the Option or the shares
acquired upon exercise thereof. The Company shall have no obligation to deliver shares of
Stock until the Company’s tax withholding obligations have been satisfied.

     (g) Nontransferability of Options; Exercise Following Death. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws of descent and
distribution or pursuant to a “qualified domestic relations order” (as defined in the Code).
During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee,
the Optionee’s guardian or legal representative or an alternate payee pursuant to a
qualified domestic relations order.

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     7. Terms and Conditions of Restricted Stock. Shares of Restricted Stock shall be subject to
restrictions on transferability and on the right of a Non-Employee Director to receive certificates
evidencing Shares of Restricted Stock, as set forth in a Restricted Stock Agreement in such form as
the Committee shall from time to time approve. Subject to such restrictions and the provisions of
such Restricted Stock Agreement and this Plan, Non-Employee Directors who receive awards of
Restricted Stock shall have all of the rights of a stockholder with respect to such Shares of
Restricted Stock. Restricted Stock granted under this Plan may be evidenced in such manner as the
Committee may deem appropriate, including, without limitation, book-entry registration or issuance
of stock certificates.

     (a) Forfeiture. Except as otherwise determined by the Committee, if a Non-Employee
Director incurs a Termination of Service other than by reason of death, Disability or
Retirement, all Shares of Restricted Stock theretofore awarded which are still subject to
restrictions shall upon such Termination of Service be forfeited and transferred back to the
Company. In addition, if a former Non-Employee Director continues to hold Restricted Stock
following his or her Termination of Service due to his or her Retirement, the Shares of
Restricted Stock which remain subject to restrictions shall nonetheless be forfeited and
transferred back to the Company if the Committee at any time thereafter determines that the
former Non-Employee Director has engaged in any activity detrimental to the interests of the
Company.

     (b) Lapse of Restrictions. The restrictions on transferability and any other
restrictions contained in a Restricted Stock Agreement shall lapse with respect to one-fifth
(1/5th) of the Shares of Restricted Stock awarded to a Non-Employee Director on
each January 5th following the Annual Grant Date for such award, so that at the
fifth (5th) such January 5th following the Annual Grant Date of an
award of Restricted Stock, all Shares shall be free of, and no longer subject to, any
restrictions. The lapse of restrictions on transferability and any other restrictions
contained in a Restricted Stock Agreement shall also be accelerated as provided in Sections
7(d) and 8.

     (c) Delivery of Shares. At the time all restrictions have lapsed with respect to
Shares covered by an award of Restricted Stock, the Company shall deliver the Shares as to
which such restrictions have lapsed as follows:

     (i) if an assignment to a trust has been made, to such trust; or

     (ii) if the Restricted Period has expired by reason of death and a beneficiary
has been designated in a form approved by the Company, to the beneficiary so
designated; or

     (iii) in all other cases, to the Participant or the legal representative of the
Participant’s estate.

     (d) Acceleration of Lapsing Only Upon Death or Disability. Notwithstanding the
provisions of Section 7(b), if an Non-Employee Director incurs a Termination of Service due
to death or Disability, or if a former Non-Employee Director dies following a Termination of
Service, then all restrictions in effect at the date of such Termination of Service or at
such date of death shall immediately lapse and all Shares shall be free of, and no longer
subject to, any restrictions. If a Non-Employee Director

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incurs a Termination of Service due to Retirement, any restrictions on Shares of
Restricted Stock remaining at the time of Retirement shall continue in effect and shall
lapse as provided in Section 7(b).

     (e) Tax Withholding. The Company shall have the right to require a Non-Employee
Director to make adequate provision for any federal, state, local or foreign taxes, if any,
required by law to be withheld by the Company with respect to the income realized by such
director as a result of the lapsing of restrictions with respect to Shares of Restricted
Stock. The Company shall have no obligation to deliver Shares of Stock that were previously
Restricted Stock until the Company’s tax withholding obligations have been satisfied.

     8. Change in Control. In the event of a Change in Control, (i) any unexercisable Options
shall be immediately exercisable and vested in full and (ii) all restrictions relating to any
Shares of Restricted Stock shall lapsed and be of no further effect, as of the date thirty (30)
days prior to the date of the Change in Control. The exercise or vesting of any Option and the
lapsing of restrictions with respect to Shares of Restricted Stock that results solely by reason of
this Section 8, shall be conditioned upon the consummation of the Change in Control. In addition,
the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as
the case may be (the “Acquiring Corporation”), may either assume the Company’s rights and
obligations under outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation’s stock. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised
as of the date of the Change in Control shall terminate and cease to be outstanding effective as of
the date of the Change in Control.

     9. Issuance of Stock. The issuance or delivery of any Option or any shares of Stock upon the
exercise of an Option or the lapsing of restrictions on Restricted Stock may be postponed by the
Company for any period required to comply with any applicable requirements under the federal
securities laws, any applicable listing requirement of the NYSE or any other requirements of
applicable laws or regulations. The Company is not obligated to deliver or issue any shares of
Stock if such delivery or issuance would constitute a violation of any provision of any law or
regulation or any rule of the NYSE. So long as the Company’s Stock is listed on the NYSE, issuance
of any Shares of Stock pursuant to an Option, or of any Shares of Restricted Stock, is conditioned
on such Shares to be issued also being listed on the NYSE. In addition, if at any time counsel to
the Company is of the opinion that the sale or issuance of Shares of Restricted Stock or Shares of
Stock pursuant to exercise of an Option is or may be unlawful under the circumstances, the Company
shall have no obligation to make such sale or issuance, and the right of an Optionee to exercise an
Option, shall be suspended until, in the opinion of the Company’s counsel, such sale or issuance is
lawful. No such suspension shall extend the period of time during which an Option must be
exercised under Section 6(c).

     10. Termination or Amendment of Plan. The Board may terminate or amend the Plan at any time.
However, subject to changes in the law or other legal requirements that would permit otherwise,
without the approval of the Company’s stockholders, there shall be (i) no increase in the total
number of shares of Stock that may be issued under the Plan, except by operation of the provisions
of Section 4(b), (ii) no change in the number of Options and Shares of Restricted Stock that will
be granted pursuant to Section 5(b) and (c), and (iii) no expansion in the class of persons
eligible to receive Options or Shares of Restricted Stock. Furthermore, to

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the extent required by Rule 16b-3, provisions of the Plan addressing eligibility to
participate in the Plan and the amount, price and timing of Options shall not be amended more than
once every six (6) months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. In any event, no termination or
amendment of this Plan may adversely affect any outstanding Option or Shares of Restricted Stock
without the consent of the Non-Employee Director, unless such amendment is necessary to comply with
applicable laws or regulations. This Plan shall terminate on April 30, 2013, and no further
Options or shares of Restricted Stock shall be granted pursuant to this Plan after such date.

     11. Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Plan. Except when otherwise
indicated by the context, the singular shall include the plural, the plural shall include the
singular, and use of the term “or” shall not be exclusive. This Plan shall be governed by the law
of the State of Delaware, regardless of the law that might otherwise govern under applicable
Delaware principles of conflict of laws.

CERTIFICATION

     The undersigned Secretary of the Company certifies that the foregoing Kaydon Corporation 2003
Non-Employee Directors Equity Plan was duly adopted by the Board on March 19, 2003, and approved by
the stockholders of Kaydon Corporation on May 9, 2003. The undersigned Secretary of the Company
further certifies that this Amended and Restated version of the Plan was adopted and made effective
by the Board on October 25, 2007, in compliance with the provision of Section 10 hereof in an
manner not requiring approval of the stockholders of Kaydon Corporation.

	 	 	 
	/s/ John F. Brocci
	 	 
	 

John F. Brocci, Secretary

	 	 

10exv10w17

 

EXHIBIT 10.17

KAYDON CORPORATION

CHANGE IN CONTROL COMPENSATION AGREEMENT

     AGREEMENT made and executed January 28, 2008 between KAYDON CORPORATION, a Delaware
corporation, 315 East Eisenhower Parkway, Suite 300, Ann Arbor, Michigan 48108 (Kaydon), and Debra
K. Crane (the Executive). This Agreement is effective on the date provided above.

     The Board of Directors of Kaydon has recommended and approved that Kaydon enter into
agreements providing for compensation under certain circumstances involving a change in control of
Kaydon. Executive is a key executive of Kaydon or one or more of its Subsidiaries and has been
selected by the Compensation Committee of the Board of Directors to enter into this Agreement.

     The Board of Directors believes it is imperative that Kaydon and the Board be able to rely
upon Executive to continue in his position should Kaydon become subject to a proposed or threatened
Change in Control. The Board also believes it is critical that Kaydon and the Board be able to
receive and rely upon Executive’s advice, if requested, as to the best interests of Kaydon and its
stockholders, without concern that Executive might be distracted by the personal uncertainties and
risks created by such a proposal or threat. The parties anticipate that this may require actions
above and beyond Executive’s regular duties as the Board determines to be appropriate.

     To assure Kaydon that it will have the continued dedication of Executive and the availability
of Executive’s advice and counsel notwithstanding the possibility, threat or occurrence of an
effort to take over control of Kaydon, and to induce Executive to remain in the employ of Kaydon
and its Subsidiaries and for other good and valuable consideration, Kaydon and Executive agree as
follows:

     1. Services During Certain Events. In the event a third person begins a tender or
exchange offer, circulates a proxy to stockholders, or takes other steps to effect a Change in
Control, Executive agrees that he will not voluntarily terminate employment with Kaydon (or the
Subsidiary then employing Executive) on less than three months written notice to the Board of
Directors or the Chief Executive Officer of Kaydon, will render the services expected of his
position, and will act in all things related to the interests of the stockholders of Kaydon until
the third person has abandoned or terminated the efforts to effect a Change in Control or until a
Change in Control has occurred.

     2. Termination In Connection With or Following Change in Control. In the event that
Executive’s employment is terminated under the circumstances stated in Subsection (a) during the
period beginning on the date a third person begins a tender or exchange offer, circulates a proxy
to stockholders, or takes other steps to effect a Change in Control and ending on the earlier of
the complete abandonment of that effort, the date which is three years following the date a Change
in Control is deemed to have occurred or the date

 

 

this Agreement ceases to apply to Executive (the Protected Period), Kaydon will provide to
Executive the rights and benefits described in Subsection (b), except as provided in Subsection
(c).

          a. Circumstances. This Agreement applies if Executive’s employment is terminated:

               i. By Kaydon. By Kaydon (or the Subsidiary employing Executive) for reasons other
than For Cause and other than as a consequence of Executive’s death, permanent disability or
attainment of the normal retirement date under the Kaydon Corporation Retirement Plan (the
Retirement Plan) or other Kaydon retirement plan applicable to Executive, as in effect immediately
preceding that date; or

               ii. By Executive. By Executive following the occurrence of any of the following
events:

                    A. Demotion. The assignment of Executive to any duties or responsibilities that are a
reduction of, or are materially inconsistent with, Executive’s position, duties, responsibilities
or status immediately preceding the beginning of the Protected Period;

                    B. Reporting.
A change in Executive’s reporting responsibilities or titles in
effect immediately preceding the beginning of the Protected Period resulting in a reduction of
Executive’s responsibilities or position;

                    C. Reduction. The reduction of Executive’s annual salary, projected or target annual
bonus (including any deferred portions), level of benefits (except for a reduction uniformly
applicable to all similarly situated executives), target long-term incentives, stock options,
projected Supplemental Executive Retirement Plan benefits, or supplemental compensation in effect
at the beginning of the Protected Period; or

                    D. Location. The transfer of Executive to a location at least fifty miles from
Executive’s location at the beginning of the Protected Period requiring a change in residence or a
material increase in the amount of travel normally required of Executive in connection with
employment.

          b. Rights and Benefits. The rights and benefits under this Agreement are all of the
following:

               i. Additional Compensation. Payment of an amount equal to:

                    A. Salary. One (1) times the greater of the Executive’s base salary for the calendar
year in which the termination of employment occurs or for the preceding calendar year; plus

                    B. Bonus. One (1) times the greater of:

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	 	• 	 	The average bonus payable to Executive over the most recent three-year fiscal
period (or the period during which the Executive has been employed by Kaydon (or any
of its Subsidiaries) if less than three years); or
	 
	 	• 	 	Executive’s target bonus for the calendar year in which the termination of
employment occurs.

               ii. Incentive Compensation. Payment of all amounts to which Executive is entitled
under all incentive compensation plans maintained by Kaydon or any Subsidiary or to which Executive
would be entitled to by virtue of Executive’s employment with the corporation or entity which
succeeds Kaydon after a Change in Control.

                    A. Incentive Compensation Plans. This amount includes, but is not limited to, any
award under any Kaydon incentive compensation plan for a prior year that has not been paid to
Executive at the time of termination of employment.

                    B. Increase. In addition, Executive shall receive an amount equal to 1/12 of the
greater of:

	 	• 	 	The projected incentive compensation plan awards for the year in which termination
of employment occurs; or
	 
	 	• 	 	The incentive compensation plan awards to the Executive for the most recently ended
plan year,

for each full or partial month in the current plan year prior to the month of Executive’s
termination of employment.

                    C. Acceleration. This Subsection (ii) may not accelerate the time, or modify the
form, of any payment to Executive unless Executive’s employment is terminated within two years
after a Change in Control as defined in Section 5.b. occurs.

               iii. Supplemental Executive Retirement Plan Benefits. In the event a Change in
Control occurs, payment of the Actuarial Equivalent (except as limited below) of the Executive’s
vested Accrued Benefit under the Kaydon Corporation Supplemental Executive Retirement Plan (the
SERP), if any, adjusted as provided in this subsection iii to the extent applicable to the
Executive.

                    A. Vesting. If the Executive is not otherwise vested in the SERP Accrued Benefit,
Executive will fully vest in the Executive’s Accrued Benefit under the SERP if the Executive:

	 	• 	 	Is age 55 or older at the time of the Change in Control; and

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	 	• 	 	Is fully vested in the Retirement Plan (or would be fully vested if Executive was a
participant in that Plan) at the time of the Change in Control.

                    B. Additional Credit. Executive’s benefit and Accrued Benefit under the SERP
will be computed by crediting the Executive with the Additional Credit provided in Section 2.18(a)
and the Discretionary Credit provided in Section 2.18(b) of the SERP if the Executive qualifies for
that credit at that time or, if the Executive does not otherwise qualify for that credit at the
time of the Change in Control under the terms of that Section 2.18(a) or (b), the Executive:

	 	• 	 	Has been (and remains) identified in the SERP as an individual eligible for that
Additional or Discretionary Credit or was removed as an individual eligible for that
Credit in anticipation of the Change in Control; and
	 
	 	• 	 	Is vested in the Executive’s Accrued Benefit under the SERP under the terms of the
SERP or subsection A, above.

                    C. Actuarial Equivalent. The Actuarial Equivalent of the payments from the SERP
determined under that Plan and this subsection shall be determined by taking into account the
reduction for early commencement of benefits imposed by that Plan and by using reasonable actuarial
assumptions. For purposes of determining the lump sum actuarial equivalent, the corresponding
actuarial assumptions provided in the Retirement Plan (or, to the extent not provided in that Plan,
as provided under GATT) shall be used.

                    D. Effect. If Executive is a Participant in the SERP, the execution of this Agreement
constitutes:

	 	• 	 	An amendment of the SERP with respect to Executive to effect these provisions;
	 
	 	• 	 	Agreement by Executive to the terms of, and consent in accordance with Section
6.1(a) of the SERP to, the amended and restated SERP adopted by the Board of
Directors on May 17, 2007 and to the amendments to the SERP provided in this
Agreement;
	 
	 	•	 	Agreement by Kaydon and Executive that Executive may not be removed from the
Additional Credit provisions of the SERP once steps to effect a Change in Control have
commenced; and
	 
	 	•	 	Agreement by Kaydon and Executive that Executive’s employment with any successor to
Kaydon shall not cause forfeiture of Executive’s benefits under the SERP under Section
3.6(a) of the SERP.

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Payment of the SERP benefit as provided by this Agreement satisfies Kaydon’s obligations to
Executive, if any, under the SERP. If Executive’s employment is terminated in
anticipation of a Change in Control but a Change in Control does not occur, subsections A., B. and
D. shall operate but payment of the SERP benefit will occur under the terms of the SERP without
acceleration under this Agreement.

                    E. Limitation. Notwithstanding any other provision of this Agreement, this subsection
(iii) does not provide any SERP benefit to Executive if Executive is not an Active Participant in
the SERP immediately prior to the Change in Control, unless Executive was removed as an Active
Participant in the SERP or the SERP was amended or terminated in anticipation of the Change in
Control.

                    F. Acceleration. This Subsection (ii) may not accelerate the time, or modify the
form, of any payment to Executive unless Executive’s employment is terminated within two years
after a Change in Control as defined in Section 5.b. occurs. If the Executive’s employment is
terminated other than as provided above, the Executive’s SERP benefit will be paid at the time and
in the form provided in the SERP without regard to the acceleration of payment and change to the
lump sum form provided by this Agreement, but within the other modifications provided here.

               iv. Other Compensation. Immediate acceleration of vesting and exercisability of any
outstanding stock option, stock appreciation right, restricted stock, or other similar incentive
compensation rights. This provision may not accelerate the time, or modify the form, of any
payment to Executive unless Executive’s employment is terminated within two years after a Change in
Control as defined in Section 5.b. occurs.

               v. Insurance and Other Special Benefits. Continued coverage under the life insurance
and medical, dental and prescription drug insurance or other coverage (ie, provision of in kind
benefits or reimbursement of expenses incurred by Executive covered by the medical, dental and
prescription drug plans, to the extent the expenses are referred to in Section 105(b) of the
Internal Revenue Code) of Kaydon and its Subsidiaries (or any successor plan or program in effect
at or after termination of Executive’s employment for employees in the same class or category as
was Executive prior to termination) for the period provided in (A), below, subject to the
conditions provided in (B), below.

                    A. Period. These benefits will be provided until the earlier of:

	 	• 	 	One year from the date of termination of Executive’s employment;
	 
	 	• 	 	The Executive’s Normal Retirement Date (as defined in the Retirement Plan) (and,
in the case of medical insurance, until Executive is eligible for Parts A and B of
Medicare or their equivalent, if later); or

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	 	• 	 	The date Executive obtains reasonably comparable life insurance, medical insurance,
dental insurance, accident insurance, or disability insurance, as
the case may be, at no greater cost to Executive than was the case at Kaydon.

     The one year limitation provided above will not apply if Executive:

	 	• 	 	Is age 55 or older at the time of the Change in Control; and
	 
	 	• 	 	Is fully vested in the Retirement Plan (or would be fully vested if Executive was a
participant in that Plan) at the time of the Change in Control.

                    B. Conditions. Continued coverage is subject to the terms of the governing plans
(other than any exclusion preventing Executive’s participation because Executive is no longer
an employee), to Executive’s making any payments for coverage required of employees in the
same class or category as was Executive prior to termination, and to any limitations necessary to
comply with Section 409A and avoid penalties on the Executive under Section 409A. Executive agrees
to waive any continued coverage that exceeds the limits imposed by Section 409A. In addition:

	 	•	 	The in kind benefits and the amount eligible for reimbursement during a taxable year
of Executive may not affect the in kind benefits to be provided or reimbursement in any
other taxable year, except that the lifetime and other benefit limits of the medical,
dental and prescription drug plans continue to apply.
	 
	 	•	 	The reimbursement of an eligible amount must be made on or before the last day of
Executive’s taxable year next following the taxable year in which the expense being
reimbursed was incurred.
	 
	 	•	 	The right to this in kind benefit or reimbursement is not subject to liquidation or
exchange for any other benefit.

                    C. Alternative. If Executive is ineligible to continue to be covered under the terms
of any such benefit plan or program, or in the event Executive is eligible but the benefits
applicable to Executive under any such plan or program after termination of employment are not
substantially equivalent to the benefits applicable to Executive immediately prior to termination,
Kaydon shall provide such substantially equivalent benefits, or such additional benefits as may be
necessary to make the benefits applicable to Executive substantially equivalent to those in effect
before termination of Executive’s employment, through other sources, subject to all of the
limitations and conditions provided above.

                    D. Other. Nothing contained in this subsection (v) shall be deemed to require or
permit termination or restriction of Executive’s coverage under any

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other plan or program of
Kaydon or any of its subsidiaries or any successor plan or program to which Executive is entitled
under the terms of such plan or program.

               vi. Outplacement Services. Reimbursement of the cost of full outplacement services
provided by the professional outplacement consulting firm of Executive’s choosing, to a maximum
cost of 15% of the Executive’s base salary for the calendar year preceding the calendar year in
which termination of Executive’s employment occurs, provided that all expenses reimbursable under
this Subsection 2(b)(vi) must be incurred no later than December 31 of the second calendar year
following the calendar year in which Executive separates from service and must be reimbursed no
later than December 31 of the third calendar year following the calendar year in which Executive
separates from service.

                    A. Effect. The amount eligible for reimbursement during a taxable year of Executive
may not affect the amount eligible for reimbursement in any other taxable year.

                    B. Timing. The reimbursement of an eligible amount must be made on or before the last
day of Executive’s taxable year next following the taxable year in which the expense being
reimbursed was incurred.

                    C. Limitation. The right to this reimbursement is not subject to liquidation or
exchange for any other benefit.

               vii. Excise Tax Payment. An additional payment in an amount to cover the full cost of
the golden parachute excise tax, and the Executive’s state and Federal income and employment taxes
on this excise tax payment, incurred by Executive at any time during Executive’s life or within ten
years after Executive’s death as a result of the rights and benefits or any other payment under
this Agreement, or under any other agreement with, or plan of, Kaydon or its Subsidiaries.

                    A. Adjustment. In the event the Internal Revenue Service subsequently adjusts the
excise tax computation described here, Kaydon shall reimburse the Executive for the full amount
necessary to make the Executive whole (less any amounts received by the Executive that the
Executive would not have received had the computations initially been computed as subsequently
adjusted), including the value of any underpaid excise tax, and any related interest and/or
penalties due to the Internal Revenue Service.

                    B. Definitions. For purposes of this Agreement, the term “golden parachute
excise tax” has the meaning assigned to the term in Sections 280G and 4999 of the Internal
Revenue Code.

                    C. Effect. The amount eligible for reimbursement during a taxable year of Executive
may not affect the amount eligible for reimbursement in any other taxable year.

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                    D. Timing. The reimbursement of an eligible amount must be made on or before the last
day of Executive’s taxable year next following the taxable year in which the Executive remits the
related taxes.

                    E. Limitation. The right to this reimbursement is not subject to liquidation or
exchange for any other benefit.

               viii. Attorney’s Fees. Reimbursement in full for Executive’s attorney’s fees and
costs reasonably incurred at any time during Executive’s life or within ten years after Executive’s
death in enforcing this Agreement against Kaydon or a successor or in seeking damages for Kaydon’s
(or a successor’s) failure to fully perform its obligations under this Agreement.

                    A. Effect. The amount eligible for reimbursement during a taxable year of Executive
may not affect the amount eligible for reimbursement in any other taxable year.

                    B. Timing. The reimbursement of an eligible amount must be made on or before the last
day of Executive’s taxable year next following the taxable year in which the expense being
reimbursed was incurred.

                    C. Limitation. The right to this reimbursement is not subject to liquidation or
exchange for any other benefit.

               ix. Penalty Tax Payment. An additional payment in the amount necessary to cover the
full cost of any tax imposed on the Executive at any time during Executive’s life or within ten
years after Executive’s death under Section 409A(a)(1)(A) of the Internal Revenue Code less the tax
to which the Executive would have been subject to in any event on the income, plus the additional
tax and interest imposed on the Executive under Section 409A(B) of the Internal Revenue Code, plus
the Executive’s state and Federal income and employment taxes on this payment, as a result of the
rights and benefits or any other payment under this Agreement, or under any other agreement with,
or plan of, Kaydon or its Subsidiaries.

                    A. Effect. The amount eligible for reimbursement during a taxable year of Executive
may not affect the amount eligible for reimbursement in any other taxable year.

                    B. Timing. The reimbursement of an eligible amount must be made on or before the last
day of Executive’s taxable year next following the taxable year in which the Executive remits the
related taxes.

                    C. Limitation. The right to this reimbursement is not subject to liquidation or
exchange for any other benefit.

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                    The specific arrangements referred to in this Subsection (b) are not intended to exclude
Executive’s participation in other benefit plans in which Executive currently participates or which
are or may become available to executive personnel generally in the class or category of Executive
or to preclude other compensation or benefits as may be authorized by the Board of Directors from
time to time.

          c. Conditions to the Obligations of Kaydon. Notwithstanding the general rules, above,
Kaydon shall have no obligation to provide or cause to be provided to Executive the rights and
benefits described above if any of the following events occurs:

               i. Prior Termination. Executive terminates employment or Kaydon (or the appropriate
Subsidiary) terminates Executive’s employment for any reason or for no reason at all prior to the
time a third person begins a tender or exchange offer, circulates a proxy to stockholders, or takes
other steps to effect a Change in Control of Kaydon (unless Kaydon (or the appropriate Subsidiary)
terminates Executive’s employment in anticipation of the Change in Control).

               ii. Termination for Cause. Kaydon terminates Executive’s employment For Cause.

                    A. For Cause. For purposes of this Agreement, termination of employment is For Cause
if Executive, in connection with the Executive’s duties as an employee of Kaydon, its Subsidiaries,
or any of its affiliates, committed a fraud or any felony, engaged in deliberate, willful or gross
misconduct, or committed any other act which causes or may reasonably be expected to cause
substantial injury to Kaydon, a Subsidiary, or any of its affiliates.

                    B. Limitation. For purposes of clarification, this use of this For Cause standard for
employment termination affects Executive’s entitlement to benefits under this Agreement only and
does not generally limit the ability of Kaydon or other employer to terminate Executive’s
employment for any reason or for no reason at all.

               iii. Resignation as Director or Officer. Executive fails, within a reasonable time
after a termination of employment which is not wrongful on the part of Kaydon (or the Subsidiary
employing Executive) and upon receiving a written request to do so, to resign as a director and/or
officer of Kaydon and each Subsidiary and affiliate of Kaydon of which Executive is then serving as
a director and/or officer.

               iv. Termination of Agreement. This Agreement ceases to be effective as to Executive
in accordance with Section 6.

               In all other events, Kaydon’s obligation to pay or cause to be paid to Executive the benefits
and to make the arrangements provided below is absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any set off, counterclaim, recoupment, defense
or other right which Kaydon may have against Executive or anyone else. Except as provided in
Section 2(b)(v), Executive’s

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entitlement to benefits under this Agreement is not subject to any duty to mitigate damages by
seeking further employment nor offset by any compensation which Executive may receive from future
employment.

     3. Confidentiality and Cooperation. Executive agrees that at all times:

          a. Confidentiality. Executive will not, without the prior written consent of Kaydon,
disclose to any person, firm or corporation any confidential information of or about Kaydon or its
Subsidiaries which is now known to Executive or which (whether before or after termination) may
become known to Executive as a result of Executive’s employment or association with Kaydon and
which could be helpful to a competitor. This limitation does not apply, however, to confidential
information that becomes publicly disseminated by means other than a breach of this Agreement.

          b. Cooperation. Executive will furnish such information and render such assistance
and cooperation as may reasonably be requested in connection with any litigation or legal
proceedings concerning Kaydon or any of its Subsidiaries (other than any legal proceedings
concerning Executive’s employment). In connection with that cooperation, Kaydon will pay or
reimburse Executive for all reasonable expenses incurred in cooperating with such requests,
provided that all expenses reimbursable under this Subsection 3(b) must be incurred and reimbursed
no later than December 31 of the second calendar year following the calendar year in which
Executive’s employment is terminated.

          The parties agree that damages in the event of breach of this Section 3 by Executive would be
difficult, if not impossible, to ascertain. The parties therefore agree that Kaydon, in addition
to and without limitation of any other remedy or right it may have, shall have the right to an
injunction or other equitable relief in any court of competent jurisdiction enjoining any such
breach. Executive waives any and all defenses Executive may have to such an action on the ground
of lack of jurisdiction or other equitable relief. The existence of this right shall not preclude
Kaydon from pursuing any other rights and remedies at law or in equity which Kaydon may have.

     4. Release. In exchange for benefits under this Agreement, Executive agrees that,
upon acceptance of those benefits, Executive will release all claims against Kaydon and its
Subsidiaries which might then exist and will execute a reasonable and customary release of any such
claims.

     5. Change in Control. For purposes of this Agreement:

          a. General Definition of Change in Control. Except as otherwise provided in this
Agreement, a Change in Control means:

               i. Directors. The failure of the Continuing Directors at any time to constitute at
least a majority of the members of the Board;

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               ii. Ownership. The acquisition by any Person other than an Excluded Holder of
beneficial ownership (within the meaning of Rule 13d-3 issued under the Act) of 20% or more of the
outstanding common stock of Kaydon or the combined voting power of Kaydon’s outstanding securities
entitled to vote generally in the election of directors;

               iii. Transaction. The approval by the stockholders of Kaydon of a reorganization,
merger or consolidation, unless with or into a Permitted Successor; or

               iv. Termination. The approval by the stockholders of Kaydon of a complete liquidation
or dissolution of Kaydon or the sale or disposition of all or substantially all of the assets of
Kaydon other than to a Permitted Successor.

          b. Change in Control For SERP Benefits and Certain Purposes. For purposes of the SERP
benefits under Section 2.b.iii., and for purposes of any acceleration or modification of the terms
of payment of any benefit under Section 2.b.ii., Section 2.b.iii., Section 2.b.iv. or any other
Section of this Agreement, a Change in Control means a Change in Control under Section 5.a., above,
that is:

               (i) 50% Stock. The acquisition, by a person or Persons Acting as a Group, of stock of
Kaydon that together with stock held by such person or group constitutes more than 50% of the total
fair market value or total voting power of the stock of Kaydon;

               (ii) 35% Stock. The acquisition, by a person or Persons Acting as a Group, of
ownership of stock of Kaydon that constitutes 35% or more of the total voting power of Kaydon’s
stock in a single transaction or within a twelve month period ending with the most recent
acquisition;

               (iii) Directors. The majority of members of the Board of Directors of Kaydon being
replaced during any twelve month period by directors whose appointment or election is not endorsed
by a majority of the members of the Board of Directors of Kaydon prior to the date of appointment
or election;

               (iv) Assets. The acquisition, by a person or Persons Acting as a Group, of Kaydon’s
assets that have a total gross fair market value equal to or exceeding forty percent (40%) of the
total gross fair market value of Kaydon’s assets in a single transaction or within a twelve month
period ending with the most recent acquisition. For the purpose of this section, gross fair market
value means the value of the assets of the corporation, or the value of the assets being disposed
of, determined without regard to any liabilities associated with such assets; or

               (v) Merger. A reorganization, merger or consolidation of Kaydon, the substantive
effect of which is a Change in Control under Section 5.b.(i), (ii), (iii), or (iv), unless with or
into a Permitted Successor

          c. Other Definitions. The following terms are defined as follows:

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               i. Continuing Directors. The Continuing Directors are the individuals constituting
the Board as of the date this Agreement was executed by Kaydon and any subsequent directors whose
election or nomination for election by Kaydon’s stockholders was approved by a vote of two-thirds
of the individuals who are then Continuing Directors, but specifically excluding any individual
whose initial assumption of office occurs as a result of either an actual or threatened election
contest (as the term is used in Rule 14a-11 of Regulation 14A issued under the Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

               ii. Excluded Holder. Excluded Holder means any Person who at the time this Agreement
was executed by Kaydon was the beneficial owner of 20% or more of the outstanding common stock of
Kaydon; or Kaydon, a Subsidiary or any Employee Benefit Plan of Kaydon or a Subsidiary or any trust
holding such common stock or other securities pursuant to the terms of an Employee Benefit Plan.

               iii. Permitted Successor. Permitted Successor means a corporation which, immediately
following the consummation of a transaction specified in the definition of “Change in Control”
above, satisfies each of the following criteria:

                    A. Stock. Sixty percent or more of the outstanding common stock of the corporation
and the combined voting power of the outstanding securities of the corporation entitled to vote
generally in the election of directors (in each case determined immediately following the
consummation of the applicable transaction) is beneficially owned, directly or indirectly, by all
or substantially all of the Persons who were the beneficial owners of Kaydon’s outstanding common
stock and outstanding securities entitled to vote generally in the election of directors
(respectively) immediately prior to the applicable transaction;

                    B. Limitation. No Person other than an Excluded Holder beneficially owns, directly or
indirectly, 20% or more of the outstanding common stock of the corporation or the combined voting
power of the outstanding securities of the corporation entitled to vote generally in the election
of directors (for these purposes the term Excluded Holder shall include the corporation, any
subsidiary of the corporation and any Employee Benefit Plan of the corporation or any such
subsidiary or any trust holding common stock or other securities of the corporation pursuant to the
terms of any such Employee Benefit Plan); and

                    C. Board. At least a majority of the board of directors is comprised of Continuing
Directors.

               iv. Person. Person has the same meaning as set forth in Sections 13(d) and 14(d)(2)
of the Act.

               v. Persons Acting as a Group. Persons Acting as a Group means owners of a corporation
that enters into a merger, consolidation, purchase or acquisition of

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stock, or similar business
transaction with the corporation. If a person, including an entity, owns stock in both corporations
that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction,
such shareholder is considered to be acting as a group with other shareholders in a corporation
prior to the transaction giving rise to the change and not with respect to the ownership interest
in the other corporation. Persons will not be considered to be acting as a group solely because
they purchase or own stock of the same corporation at the same time or as a result of the same
public offering, or purchase assets of the same corporation at the same time.

               vi. Act. Act means the Securities Exchange Act of 1934, as amended.

               vii. Employee Benefit Plan. Employee Benefit Plan means any plan or program
established by Kaydon or a Subsidiary for the compensation or benefit of employees of Kaydon or any
of its Subsidiaries.

               viii. Subsidiary. Subsidiary means any corporation or other entity of which 50% or
more of the outstanding voting stock or voting ownership interest is directly or indirectly owned
or controlled by Kaydon or by one or more Subsidiaries of Kaydon.

     6. Term of Agreement. Subject to Section 2 and the remainder of this Section 6, this
Agreement shall terminate on December 31 of the year in which it is effective.

               i. Extension. This Agreement shall automatically renew for successive one-year terms,
each ending on the anniversary of December 31, unless Kaydon notifies Executive in writing at least
30 days prior to the expiration date of the original or a successive term that it does not wish to
renew the Agreement for an additional term.

               ii. Limitation. Notwithstanding those general rules, the Board of Directors may
terminate this Agreement as to Executive for good cause (including but not limited to a diminution
in Executive’s duties and responsibilities with Kaydon) during the original or a successive
term, on 30 days advance written notice to Executive.

          Notice of non-renewal or termination shall not be given, and if given shall have no effect,
and Board action to terminate the Agreement will not be effective, however, within three years
after a Change in Control or during any period of time when Kaydon has reason to believe that any
third person has begun a tender or exchange offer, circulated a proxy to stockholders, or taken
other steps or formulated plans to effect a Change in Control. That period of time ends when, in
the opinion of the Board of Directors, the third person has abandoned or terminated the efforts or
plans to effect a Change in Control.

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     7. Miscellaneous. In addition, the following terms govern.

          a. Assignment. No right, benefit or interest under this Agreement is subject to
assignment, anticipation, alienation, sale, encumbrance, charge, pledge, hypothecation or set-off
in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process.
Executive may, however, assign any right, benefit or interest under this Agreement if the
assignment is permitted under the terms of any plan or policy of insurance or annuity contract
governing such right, benefit or interest.

          b. Construction of Agreement. Nothing in this Agreement shall be construed to amend
any provision of any plan or policy of Kaydon other than as specifically stated here.

               i. Employment. This Agreement is not, and nothing here shall be deemed to create, an
employment contract between Executive and Kaydon or any of its Subsidiaries. Executive
acknowledges that the rights of Kaydon and the Subsidiary employing Executive to change or reduce
at any time and from time to time Executive’s compensation, title, responsibilities, location and
other aspects of the employment relationship or to discharge Executive prior to a Change in Control
shall remain wholly unaffected by the provisions of this Agreement, except as explicitly limited in
this Agreement.

               ii. No Waiver. No waiver by either party to this Agreement at any time of any breach
by the other party to this Agreement, or noncompliance with any condition or provision of this
Agreement to be performed by such other party, shall be deemed a waiver of that or of any other
provision or condition.

               iii. Integration. This Agreement sets forth the entire agreement of the parties on
the subjects addressed here and no agreements or representations express or implied on such
subjects have been made by either party which are not set forth expressly in this Agreement.

          c. Amendment. Except as otherwise provided in this Agreement, this Agreement may not
be amended, modified or canceled except by written agreement of the parties.

          d. Waiver. No provision of this Agreement may be waived except by a writing signed by
the party to be bound.

          e. Severability. In the event that any provision or portion of this Agreement is
determined to be invalid or unenforceable for any reason, the remaining provisions of this
Agreement shall remain in full force and effect to the fullest extent permitted by law.

          f. Successors. This Agreement shall be binding upon and inure to the benefit of
Executive and Executive’s personal representative and heirs, and upon Kaydon

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and any successor organization or organizations which shall succeed to substantially all of
the business and property of Kaydon whether by means of merger, consolidation, acquisition of
substantially all of the assets of Kaydon or otherwise, including by operation of law. References
here to duties and obligations of Kaydon following a Change in Control are binding upon and shall
be the joint and several liability of Kaydon and any successor of it and all Subsidiaries of Kaydon
and any successors of any of them.

          g. Taxes. Any payment or delivery required under this Agreement shall be subject to
all requirements of the law with regard to withholding of taxes, filing, making of reports and the
like. Kaydon shall use its best efforts to satisfy promptly all such requirements.

          h. Payment. All amounts payable by or on behalf of Kaydon under this Agreement shall,
unless specifically stated to the contrary in this Agreement, be paid in a lump sum in U.S.
Dollars, without notice or demand, on the first day of the second month following termination of
Executive’s employment (or for payment of the SERP benefits to an Executive whose employment
terminated prior to a Change in Control, on the first day of the second month following the Change
in Control). Each and every payment made by or on behalf of Kaydon shall be final and Kaydon and
its subsidiaries shall not, for any reason whatsoever, seek to recover all or any part of any
payment from Executive or from whomever is entitled to it.

               i. Delay in Payment to Specified Employees. Notwithstanding that general rule
regarding payment and the remaining provisions of this Plan, no payment may be made under any
provision of this Agreement to a Specified Employee during the first six months following the
Specified Employee’s separation from service with Kaydon (or any related entity) if the payment is
due to the Specified Employee as a result of that separation from service. 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.

               ii. 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 Kaydon (or any related entity) with annual compensation
greater than $140,000 in 2006 (as adjusted for future years as provided in Section 416 of the
Internal Revenue Code);

                    B. Five Percent Owner. A 5-percent owner of Kaydon (or any related entity) ; or

                    C. One Percent Owner. A 1-percent owner of Kaydon (or any related entity) with annual
compensation greater than $150,000.

                    Such an employee is a Specified Employee for the 12-month

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period beginning the first April 1 following the Identification Date and ending on March 31 of the
following year.

               i. Death. If Executive dies prior to the time all payments due to Executive under
this Agreement have been made, then as soon as practicable after Executive’s death (but in no
event later than 90 days after), Kaydon shall pay in a lump sum in U.S. Dollars all sums not paid
to Executive prior to his death. Payment shall be made to the beneficiary or beneficiaries (in
addition to the amount of life insurance proceeds payable to each beneficiary) named under the life
insurance plan or plans maintained by Kaydon on the date of Executive’s death. If no such
beneficiary is named, such sums shall be paid to Executive’s estate. Except as provided in
Subsection 2(b)(iii), no reduction to present value of any such sums shall be made.

     IN WITNESS, the parties have executed this Agreement this 28th day of January, 2008.

	 	 	 	 	 
	KAYDON CORPORATION	 	EXECUTIVE	 
	 
	By 	/s/
James O'Leary	 	/s/
Debra
K. Crane
	 	James O’Leary 	 
	 	Its  President and CEO	 	 
	 

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