KAYDON CORP, DEF 14A, 1997-03-05

KAYDON CORP
DEF 14A, 1997-03-05
BALL & ROLLER BEARINGS

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

Kaydon Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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[ ] Fee paid previously with preliminary materials:

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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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<PAGE> 2

KAYDON CORPORATION
---------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------

Tampa, Florida
March 5, 1997

To Shareholders:

The Annual Meeting of Shareholders of Kaydon Corporation ("Kaydon") will be
held at Tampa Airport Marriott Hotel, Tampa International Airport, Tampa,
Florida on Friday, April 25, 1997 at 10:00 a.m. for the following purposes:

(1) to elect a Board of Directors;

(2) to approve an amendment to the Kaydon Corporation 1993 Stock
Option Plan to enable options granted under the Plan to qualify as
deductible performance-based compensation under Section 162(m) of the
Internal Revenue Code; and

(3) to transact such other business as may properly come before the
meeting and any adjournment thereof.

Shareholders of record at the close of business on February 24, 1997 are
entitled to notice of and to vote at the meeting.

JOHN F. BROCCI
Vice President Administration
and Secretary

THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND IMMEDIATE RETURN OF THE
ACCOMPANYING PROXY.

You can help avoid the necessity and expense of sending a follow-up letter by
the prompt completion and return of the enclosed proxy whether or not you expect
to attend the Annual Meeting of Shareholders. For your convenience, there is
enclosed a self-addressed envelope requiring no postage if mailed in the United
States.
<PAGE> 3

KAYDON CORPORATION
ARBOR SHORELINE OFFICE PARK
19345 U.S. 19 NORTH, SUITE 500
CLEARWATER, FLORIDA 34624
---------------------

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 25, 1997

---------------------

PROXY STATEMENT
---------------------

March 5, 1997

INTRODUCTION

The Annual Meeting of Shareholders of Kaydon Corporation ("Kaydon") will be
held on Friday, April 25, 1997, at the Tampa Airport Marriott Hotel, Tampa
International Airport, Tampa, Florida at 10:00 a.m. for the purposes set forth
in the accompanying notice. This statement is furnished in connection with the
solicitation by Kaydon's Board of Directors of proxies to be voted at such
meeting and at any and all adjournments thereof. Proxies properly executed, duly
returned and not revoked will be voted at the Annual Meeting (including
adjournments) in accordance with the specifications therein.

Participants in the Kaydon Corporation Employee Stock Ownership and Thrift
Plan, the Electro-Tec Corporation Employee Retirement Benefit Plan and the
Seabee Corporation Pension and Retirement Savings Plan will receive separate
voting instruction cards covering the shares held for participants in those
Plans. Voting instruction cards must be returned or the shares will not be voted
by the trustee.

If a proxy in the accompanying form is executed and returned, it may
nevertheless be revoked at any time prior to the exercise thereof by executing
and returning a proxy bearing a later date, by giving notice of revocation to
the Secretary of Kaydon, or by attending the Annual Meeting and voting in
person.

At the Annual Meeting, holders of Kaydon's Common Stock shall have one vote
per share.

ELECTION OF DIRECTORS

The persons designated as proxies in the accompanying proxy have been
selected by the Board of Directors of Kaydon and have indicated that they intend
to vote all proxies received by them for the election of each of the following
nominees for the office of director of Kaydon, unless instructed otherwise, each
to serve until the Annual Meeting of Shareholders next succeeding their election
and until their successors have been duly elected and qualified.

The Directors shall be elected by a plurality of votes validly cast in
person or by proxy at any meeting at which a quorum is present. The presence in
person or by proxy of the holders of record of a majority of the shares entitled
to vote at a meeting of stockholders constitutes a quorum. Votes are counted at
the meeting by the Inspector of Elections. Abstentions will be counted as votes
for the election of all nominees as Directors. Broker non-votes will be voted
for the election of all nominees as Directors.

If for any reason any of the following nominees is not a candidate when the
election occurs, which is not anticipated, it is intended that the proxies will
be voted for the election of a substitute nominee if one is designated by the
Board of Directors.
<PAGE> 4

NAME AND AGE OF NOMINEES
- ------------------------

Gerald J. Breen (51)......... Mr. Breen has been the owner, President and Chief
Executive Officer of Cuyam Corporation since
1986. From 1983 to 1986, Mr. Breen was the
President and General Manager of Hendrickson
International, and was with Imperial Clevite,
Inc. from 1972 to 1983, his last position being
that of Vice President, Replacement Marketing. He
has been a Director of Kaydon since January 1992.

Brian P. Campbell (56)....... Mr. Campbell has been President of TriMas
Corporation since 1986. From 1974 to 1986 Mr.
Campbell held several executive positions at
Masco Corporation, including Vice President of
Business Development and Group President. He has
been a Director of Kaydon since September 1995.

Lawrence J. Cawley (62)...... Mr. Cawley has been Chairman of the Board of
Kaydon Corporation since June 1996. Prior to that
he was Chairman and Chief Executive Officer from
September 1989 to June 1996. From November 1987
to September 1989, he was President and Chief
Executive Officer of Kaydon. Mr. Cawley served as
President and Chief Operating Officer of Kaydon
from April 1987 to November 1987 and was
President of the Bearing Division of Kaydon from
October 1985 to April 1987. He has been a member
of Kaydon's Board of Directors since April 1986.
Prior to joining Kaydon, Mr. Cawley was President
and General Manager of Clevite, a division of
Imperial Clevite Corporation.

Stephen K. Clough (43)....... Mr. Clough has been President and Chief Executive
Officer of Kaydon Corporation since June 1996. He
was President and Chief Operating Officer of
Kaydon from September 1989 to June 1996. He was
Vice President and General Manager of Kaydon's
Bearing Division from April 1987 to September
1989 and was Vice President of Operations of the
Automotive Division of Kaydon from April 1986 to
April 1987. Mr. Clough has been a member of
Kaydon's Board of Directors since September 1989.
Prior to joining Kaydon, Mr. Clough was a Plant
Manager in the Engine Parts Division of Imperial
Clevite Corporation.

John H. F. Haskell, Jr.
(64)......................... Mr. Haskell has served as a Managing Director of
Dillon, Read & Co. Inc. since 1975. Mr. Haskell
is a member of the Board of Directors of Dillon,
Read & Co. Inc., and Chairman of the Supervisory
Board of Dillon, Read (France) Gestion, an
indirect subsidiary of Dillon, Read & Co. Inc.
located in France. Mr. Haskell is a Director of
The Equitable Companies Incorporated and The
Equitable Life Assurance Society of the United
States. He is also a member of the Council on
Foreign Relations. He has been a Director of
Kaydon since December 1984.

DIRECTOR COMPENSATION AND BOARD COMMITTEES

During 1996, Kaydon's Board of Directors met six times for regular
meetings. Each outside Director received $2,000 for each attendance of the Board
of Directors regular meeting. Each outside Director was paid $12,000 as a
retainer for the year, which amount is paid quarterly. In addition to the
payment of such fees, the Company reimburses all Directors for expenses incurred
in carrying out their duties. During the year Mr. Brian P. Campbell and Mr. John
H. F. Haskell, Jr., who are both outside Directors, were each awarded 10,000
shares of Kaydon stock in accordance with the 1993 Non-Employee Directors Stock
Option Plan.

2
<PAGE> 5

Each Director attended more than 75% of the aggregate of the total meetings of
the Board of Directors and the total number of meetings held by all committees
of the Board of Directors on which the Directors served.

The Board of Directors has an Audit Committee and a Compensation Committee.
The principal responsibilities of the Audit Committee are to ensure for the
Board of Directors: (a) that generally accepted accounting principles are being
followed; and (b) that the total audit coverage of the Corporation and its
subsidiaries is satisfactory. The Audit Committee provides an open avenue of
communication between management and the external auditors and the Board of
Directors. The Committee reviews the nature of all services performed by the
external auditors, including the scope and extent of their audit, the results of
their audit, and their compensation. The Committee met two times during the
year. The members of the Committee are: John H.F. Haskell, Jr. (Chairman),
Gerald J. Breen and Brian P. Campbell.

The principal responsibilities of the Compensation Committee are to: (a)
review and advise management on broad compensation policies, incentive programs,
stock option and stock purchase plans, deferred compensation and retirement
plans; (b) approve and recommend base salaries, salary increases and other
benefits for elected officers; (c) take certain actions required or permitted to
be taken by the Board of Directors under the stock option plan and incentive
compensation plans of Kaydon; and (d) review recommendations for major changes
in compensation, benefit and retirement plans which have application to
significant numbers of Kaydon's total employees and which require review or
approval of the Board of Directors. The Committee met four times during the
year. The members of the Committee are: Gerald J. Breen (Chairman), Brian P.
Campbell and John H. F. Haskell, Jr.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

NUMBER OF SHARES OUTSTANDING, RECORD DATE AND LIST OF SHAREHOLDERS

Only shareholders of record at the close of business on February 24, 1997
are entitled to notice of and to vote at the Annual Meeting. At the close of
business on such date there were 16,481,839 shares of common stock of Kaydon
outstanding. A shareholders list will be available for examination by
shareholders at the Annual Meeting in accordance with Section 219 of the
Delaware Corporation Law.

COMMON STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table sets forth information as of December 31, 1996,
concerning the only persons known to Kaydon to be the beneficial owners of more
than 5% of Kaydon's issued and outstanding stock:

<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS AMOUNT AND NATURE OF ISSUED AND OUTSTANDING
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) COMMON STOCK
- ------------------- ----------------------- ----------------------
<S> <C> <C>
FMR Corporation.............................. 1,725,400 10.50%
82 Devonshire Street
Boston, MA 02109

NewSouth Capital Management, Inc............. 876,025 5.3%
1000 Ridgeway Loop Rd., Suite 233
Memphis, TN 38120
</TABLE>

- ---------------

(1) These shares are owned by various individual and institutional investors
for which FMR Corporation and NewSouth Capital Management, Inc.
respectively serve as investment advisors with power to direct investments
and/or shared power to vote the shares. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, FMR Corporation and
NewSouth Capital Management, Inc. are deemed to be beneficial owners of
such shares; however, each expressly disclaims that they are, in fact,
the beneficial owners of such shares.

3
<PAGE> 6

The following table presents information regarding beneficial ownership of
Kaydon's common stock by each member of the Board of Directors and other
Executive Officers as of December 31, 1996.

<TABLE>
<CAPTION>
PERCENTAGE OF ISSUED
AMOUNT AND NATURE AND OUTSTANDING
OF BENEFICIAL OWNERSHIP COMMON STOCK ON
BOARD OF DIRECTORS OF COMMON STOCK DECEMBER 31, 1996
- ------------------ ----------------------- --------------------
<S> <C> <C>
Gerald J. Breen.......................................... 10,000(1) *
5200 Harvard Ave.
Cleveland, OH 44105

Brian P. Campbell........................................ 4,500(2) *
315 East Eisenhower Parkway, Suite 300
Ann Arbor, MI 48108

Lawrence J. Cawley....................................... 150,259(3) *
19345 U.S. 19 North, Suite 500
Clearwater, FL 34624

Stephen K. Clough........................................ 82,169(4) *
19345 U.S. 19 North, Suite 500
Clearwater, FL 34624

John H.F. Haskell, Jr.................................... 25,500(5) *
535 Madison Ave., 15th Floor
New York, NY 10022

OTHER EXECUTIVE OFFICERS
John F. Brocci........................................... 46,500(6) *
19345 U.S. 19 North, Suite 500
Clearwater, FL 34624

All officers and directors as a.......................... 318,928 1.9%
group, 6 persons
</TABLE>

- ---------------

* Less than one percent.
(1) Included in these shares are 10,000 shares which are acquirable under the
Stock Option Plan in 1997.
(2) Included in these shares are 1,000 shares owned by a trust as to which Mr.
Campbell disclaims beneficial ownership, and 2,500 shares which are
acquirable under the Stock Option Plan in 1997.
(3) Included in these shares are 25,000 owned by Mrs. Cawley as to which Mr.
Cawley disclaims beneficial ownership, and 55,000 shares which are
acquirable under the Stock Option Plan in 1997.
(4) Included in these shares are 28,750 shares which are acquirable under the
Stock Option Plan in 1997.
(5) Included in these shares are 2,500 shares which are acquirable under the
Stock Option Plan in 1997.
(6) Included in these shares are 25,000 shares which are acquirable under the
Stock Option Plans in 1997.

4
<PAGE> 7

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPEN- STOCK OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) SATION ($) AWARDS($) SARS(#) ($) ($)
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- --------------------------------- ---- -------- -------- ---------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence J. Cawley,.............. 1996 $345,000 $775,500 0 0 55,000 0 0
Chairman and Chief 1995 $325,288 $500,000 0 0 0 0 0
Executive Officer to 1994 $300,288 $337,500 0 0 15,000 0 0
June 1996, Chairman
thereafter

Stephen K. Clough,............... 1996 $275,000 $775,500 0 0 45,000 0 0
President and Chief 1995 $238,171 $400,000 0 0 0 0 0
Operating Officer to 1994 $223,961 $270,000 0 0 10,000 0 0
June 1996, President
and Chief Executive
Officer thereafter

John F. Brocci,.................. 1996 $118,750 $266,160 0 0 35,000 0 0
Vice President 1995 $112,249 $156,784 0 0 0 0 0
Administration 1994 $105,961 $ 94,500 0 0 5,000 0 0
</TABLE>

- ---------------
Column (C): Includes deferrals into the 401(k) plan.

Column (G): Reflects the number of Non-qualified Stock Options granted. Kaydon
does not have a Stock Appreciation Rights (SAR) Plan.

The Company has not entered into any employment contract with any of the
named Officers or Directors. However, it has entered into Change-in-Control
Compensation Agreements with its executive officers, as described more fully
below, and has entered into a Supplemental Executive Retirement Plan ("SERP") as
described in the Pension Plan section of this Proxy.

CHANGE IN CONTROL COMPENSATION AGREEMENTS

Kaydon Corporation entered into Change-in-Control Compensation Agreements
dated October 23, 1995 with the three Executive Officers. The Change-in-Control
Compensation Agreements provide that in the event of (i) the termination by
Kaydon of the executive officer's employment within three years after a change
in control (as defined in the agreement) of the Company (except for reasons of
retirement, death, disability or cause), or (ii) the termination by the officer
within three years after a change in control of the Company for specified
reasons, such officer will be entitled to termination benefits. The permissible
reasons for the executive officer to terminate his employment and receive
termination benefits include a substantial reduction in his duties and
responsibilities, a reduction in his compensation or benefits package or the
transfer of the executive officer to a location requiring a change in his
residence or a material increase in the amount of travel normally required.

The termination benefits to which the Executive Officer is entitled include
three times the executive's annual base salary at the time of termination,
payable in a lump sum payment, and certain other benefits provided in the
agreement. None of the benefits would be affected or reduced if the officer were
to obtain new employment after his termination by Kaydon. The Change-in-Control
Compensation Agreements were approved by the Board as reasonable termination
compensation for the Executive Officers in order to encourage management to
remain with the Company and to continue to devote full attention to Kaydon's
business in the event of a threatened change-in-control of the Company.

5
<PAGE> 8

REPORT OF THE KAYDON CORPORATION COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION

The Compensation Committee of the Board of Directors is composed entirely
of outside directors. The Committee is responsible for establishing and
administering the Company's Executive Compensation program.

(A) COMPENSATION PHILOSOPHY AND OBJECTIVES

The Company's compensation philosophy is designed to support the overall
objective of creating value for our shareholders through:

- Hiring, developing, rewarding and retaining talented and productive
employees;

- Emphasizing pay-for-performance by having a significant portion of
cash compensation for senior managers and executives at-risk through
performance bonus plans based upon financial, operating, strategic and
growth objectives; and

- Providing equity-based incentives for selected employees to ensure
they are motivated over the long-term to respond to the Company's business
challenges and opportunities as owners, as well as employees.

(B) THE PROGRAM IN GENERAL

Kaydon Corporation's executive pay program is made up of the following
elements:

- Base Salary

Salaries of officers are listed in the Summary Compensation Table.
Each executive officer's performance and salary is reviewed annually by the
Compensation Committee. The following considerations are used in
determining the appropriate salary level: (a) the individual's sustained
performance and contribution to the company; (b) their experience and job
mastery; (c) their level of responsibility; (d) internal equity; (e)
external pay practices; and (f) the Company's overall financial results.

The Base Pay component of annual compensation is based upon
competitive pay practices of other industrial companies of similar size for
persons in comparable positions. The Hewitt Associates Middle Market Index
and other national independent published surveys are used to establish
salary midpoints for comparable positions within Kaydon. Companies
participating in these surveys differ from those companies represented in
the comparator group in the Performance Graph on Page 12 because Kaydon
competes for talent with a broader group of employers than just those in
its industry. For example, of the 125 employers participating in the Middle
Market Survey, only 4 are also in the comparator group. Salary range
midpoints are generally set at approximately the 50th percentile of the
market. An individual executive's base salary may be above or below the
salary midpoint depending on such variables as the individual's performance
and achievement, experience and job mastery, time in position and overall
contributions. The weight given these factors or other performance
objectives during the annual review in setting each executive officer's
base salary is determined subjectively by the Compensation Committee.

Kaydon believes that maximum performance can be encouraged through the
use of substantial annual incentive programs based upon attaining planned
operating and growth goals, with increased proportional rewards for
exceeding targets. Except for base pay, all other elements of executive
compensation are at risk.

- Annual Incentive Compensation Program

Kaydon believes in results. Its incentive compensation program is
designed to reward results by providing:

- incentive compensation that varies in a manner consistent with
the financial performance of the Company or operating unit; and

6
<PAGE> 9

- incentive compensation that effectively rewards
corporate/operating unit and individual performance.

Kaydon's Management Incentive Compensation (MIC) Program is a
combination of Management by Objectives (MBO) and profit sharing that
focuses the Company and its Operating Units on performance objectives
relative to financial, operating and strategic business unit and corporate
growth goals which are considered fundamental to the future success of our
business(es) and which build shareholder value. Officers and certain other
salaried employees are eligible to participate.

Management's performance, and hence its rewards, are measured in such
stockholder terms as Earnings Per Share (EPS), Earnings Before Interest and
Taxes (EBIT), and Return On Capital Employed (ROCE).

The annual bonus pool for the MIC program for executive officers is
generated at the rate of $80,000 for each 1% improvement in Kaydon's EPS
over the prior year, after reflecting the management incentive compensation
annual pool as a cost in arriving at pre-tax income. The non-employee
Directors may add to, or delete from, the formula generated pool up to
$250,000 at their discretion, based upon their subjective evaluation of
non-EPS performance factors. In 1996, Kaydon's EPS improved 33.8%. The
non-employee directors did not add to or reduce the formula generated pool.
The actual award to executive officers under this program is a function of
the number of points each has been awarded under the program multiplied by
the dollar amount produced by the Earnings Per Share formula described
above. The points assigned to executive officers and the comparison of
performance to predetermined specific goals are determined subjectively for
each executive officer by the Compensation Committee and approved by the
Board of Directors.

The total annual payout from Kaydon's Management Incentive
Compensation Program for all eligible operations and participants within
the Company is limited to no more than 15% of Kaydon's pre-tax earnings.

All awards under this program are subject to review and approval by
the Compensation Committee.

- Employee Stock Options

Stock options encourage and reward effective management that results
in long-term corporate financial success as measured by stock price
appreciation. Stock options only have value if the price of Kaydon's stock
appreciates in value from the date the stock options are granted.
Stockholders of Kaydon also benefit from such stock price appreciation.

Kaydon's Employee Stock Option Plan has two components: incentive
stock options and non-qualified stock options. No incentive stock options
have been awarded since 1986. To encourage a longer-term perspective, the
options cannot be exercised immediately. Further, grants have not been made
at an option price less than the market value on the day of the grant.
Stock options may be awarded annually consistent with the Company's
objective to weight total compensation toward long-term equity interest for
managers and executive officers with greater opportunity for reward if
long-term performance is sustained.

The Employee Stock Option Plan is overseen by the Compensation
Committee (which consists of non-employee directors under the Plan). The
Plan terms are supplemented by administrative guidelines and internal
policies which govern the day-to-day workings of the Plan. However,
consideration for and/or the granting of any stock option is within the
subjective determination of the Committee and each employee stock option
award requires approval by the Compensation Committee.

Generally, the Compensation Committee reviews and may grant stock
options in December of each year. In 1995 the Committee did not review and
award any employee stock option grants. However, in January 1996 and
December 1996, the Committee awarded a total 367,200 stock option grants;
114,000 to 72 employees in January, and 208,200 to 133 employees in
December.

7
<PAGE> 10

- CEO Compensation - Lawrence J. Cawley

Lawrence J. Cawley is the Chairman of the Board of Kaydon Corporation.
He was Chairman and Chief Executive Officer from September 1989 to June
1996.

- Base Salary

Mr. Cawley's base pay range and midpoint is established in the
manner described above.

Mr. Cawley's performance is reviewed annually by the Compensation
Committee. In 1996, Mr. Cawley's base salary was neither increased nor
decreased.

- Incentive Compensation

Mr. Cawley's incentive compensation is determined in the manner
described above. Mr. Cawley's actual award is a function of the number
of points he has been awarded under the program (his points were
established in 1987 and remain unchanged through 1996) multiplied by the
dollar amount produced by the program formula. Based upon the subjective
judgment of the Compensation Committee in consideration of (a) the
Company's performance over a several year timeframe; and (b) the
performance and contribution of Mr. Cawley to that success, the
Committee increased Mr. Cawley's 1996 incentive compensation.

- Stock Options

In 1996 Mr. Cawley was granted options for 55,000 shares of Kaydon
stock based upon the Company's continuing performance, his performance
and overall contributions to the Company, the length of time since his
last grant and the options previously granted. No particular weight was
attached to any single factor and the final determination was based on
the Compensation Committee's subjective judgment regarding Mr. Cawley's
performance and overall contribution, the Company's performance and
other factors.

- CEO Compensation - Stephen K. Clough

Stephen K. Clough has been President and Chief Executive Officer (CEO)
since June 1996. He was President and Chief Operating Officer (COO) from
September 1989 to June 1996.

- Base Salary

Mr. Clough's base pay range and midpoint is established in the
manner described above. As Chief Executive Officer, his performance is
reviewed annually by the Compensation Committee. In 1996 Mr. Clough
received a promotional increase in base pay of 25% upon assuming the
duties of CEO. The Compensation Committee determined this increase was
within the base salary range and competitive pay practices.

- Incentive Compensation

Mr. Clough's incentive compensation is determined in the manner
described above. His actual award is a function of the number of points
he has been awarded under the program multiplied by the dollar amount
produced by the program formula. The Compensation Committee increased
Mr. Clough's points for 1996 by 25% when he was promoted to CEO. Based
upon the subjective judgment of the Compensation Committee in
consideration of (a) the Company's performance over a several year
timeframe; and (b) the performance and contribution of Mr. Clough to
that success, the Committee increased Mr. Clough's 1996 incentive
compensation.

8
<PAGE> 11

- Stock Options

In 1996 Mr. Clough was granted options for 45,000 shares of Kaydon
stock based upon the Company's continuing performance, his performance
and overall contribution to the Company, and his promotion to CEO. The
Committee further considered the length of time since his last grant and
the options previously granted. No particular weight was attached to any
single factor and the final determination was based on the Compensation
Committee's subjective judgment regarding Mr. Clough's performance and
overall contribution, the Company's performance and other factors.

- Committee Policy Regarding Compliance with Section 162(m) of the Code

Section 162(m) of the Internal Revenue Code, effective January 1,
1994, establishes a limit on the deductibility of annual compensation for
certain executive officers that exceeds $1,000,000 per year per executive
unless such pay is pursuant to qualifying performance-based plans approved
by the stockholders of the Company. Compensation as defined includes, among
other things, base salary, incentive compensation and gains on stock option
transactions.

The Committee establishes individual executive compensation based
primarily upon the Company's performance and competitive considerations. As
a result, executive compensation may exceed $1 million in a given year. The
Committee will continue to consider ways to maximize deductibility of
executive compensation, while retaining the discretion the Compensation
Committee deems necessary to compensate executive officers in a manner
commensurate with the performance of Kaydon and the competitive environment
for executive talent. In particular, the Kaydon Corporation 1993 Stock
Option Plan is proposed to be amended in a manner which the Company intends
will continue to allow options granted under the Plan to qualify for the
Code's provision for performance-based compensation.

COMPENSATION COMMITTEE:

Gerald J. Breen (Chairman)
Brian P. Campbell
John H. F. Haskell, Jr.

9
<PAGE> 12

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No executive officer, Director or member of the Compensation Committee of
the Company had any interlocking relationship which would require disclosure in
this Proxy Statement, except that Mr. Haskell is an executive officer of Dillon,
Read & Co., Inc., an investment banking firm that performed services for the
Company during 1996.

OPTION/SAR GRANTS TABLE

JANUARY 1996 GRANT

<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF ALTERNATIVE TO
STOCK PRICE (F) AND (G):
APPRECIATION FOR GRANT DATE
INDIVIDUAL GRANTS OPTION TERM VALUE
- ----------------------------------------------------------------------------- ----------------- --------------
(A) (B) (C) (D) (E) (F) (G) (H)
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($) VALUE($)
- ---- ------------ ------------ ----------- ---------- ------ ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence J. Cawley... 20,000 17.5% 30.75 1/24/2001 -- -- $8.04

Stephen K. Clough.... 15,000 13.1% 30.75 1/24/2001 -- -- $8.04

John F. Brocci....... 10,000 8.7% 30.75 1/24/2001 -- -- $8.04
</TABLE>

OPTION/SAR GRANTS TABLE

DECEMBER 1996 GRANT

Stephen K. Clough.... 30,000 14.4% 43.50 12/18/2001 -- -- $14.91

John F. Brocci....... 20,000 9.6% 43.50 12/18/2001 -- -- $14.91
</TABLE>

- ---------------

(1) Column (H) calculation made in accordance with the Black-Scholes option
pricing model. The model assumes:
(a) An option term of five (5) years which is the life of the grant.
(b) Expected volatility which is calculated using the daily closing price
of the stock for the six (6) months immediately preceding the option
grant.
(c) Dividend yield at $.48 per share which is the annualized dividend paid
to shareholders on the date of the grant.

10
<PAGE> 13

(d) The risk-free rate of return is the average monthly U.S. Treasury note
with a maturity date corresponding to the option term (i.e., 5 years).
(e) No adjustments for non-transferability or risk of forfeiture.
(2) The material terms of the option are as follows: 25% of the option is
exercisable one year from the date of the grant and an additional 25% is
exercisable each of the following three years. The right to purchase is
cumulative. Exercisability may be accelerated upon death, disability,
retirement, certain mergers or other corporate events, or a change in
control of Kaydon. The option price may be paid in stock or cash.
(3) Column (B) and (C) -- Kaydon does not have a Stock Appreciation Rights
(SAR) Plan.
(4) (a) Mr. Cawley received 2 option grants of 20,000 and 35,000 shares for the
January 1996 and December 1996 grants, respectively.
(b) Mr. Clough received 2 option grants of 15,000 and 30,000 shares for the
January 1996 and December 1996 grants, respectively.
(c) Mr. Brocci received 2 option grants of 10,000 and 20,000 shares for the
January 1996 and December 1996 grants, respectively.

OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE

<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION/SAR VALUE
- ----------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Lawrence J. Cawley........................... 97,200 2,029,450 (E) 30,000 739,687
(U) 70,000 817,187

Stephen K. Clough............................ 58,000 1,353,500 (E) 10,000 241,875
(U) 55,000 596,250

John F. Brocci............................... 22,500 466,875 (E) 12,500 303,125
(U) 40,000 375,312
</TABLE>

- ---------------

Note: Kaydon stock closed at $47.125 on December 31, 1996.

LONG-TERM INCENTIVE PLAN AWARDS TABLE

<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE BASED PLANS
-------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNTIL MATURA- THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) TION OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
- ---- ------------- -------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Lawrence J. Cawley........................ 0 0 0 0 0

Stephen K. Clough......................... 0 0 0 0 0

John F. Brocci............................ 0 0 0 0 0
</TABLE>

11
<PAGE> 14

COMPARISON OF FIVE YEAR CUMULATIVE RETURNS (1991-1996) TABLE

<TABLE>
<CAPTION>
MEASUREMENT PERIOD MACHINERY
(FISCAL YEAR COVERED) KAYDON S&P 500 INDEX
<S> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 $107.66 $107.79 $110.68
1993 $ 96.58 $118.66 $141.86
1994 $113.71 $120.56 $138.32
1995 $146.17 $165.78 $160.14
1996 $229.50 $204.30 $188.93
</TABLE>

- Assumes $100 invested at the close of trading in December, 1991
in Kaydon Corporation common stock, Standard & Poors 500 and
Machinery group.
- Total Return Assumes Reinvestment of Dividends.
- Based Upon Fiscal Year Ending December 31, 1996.
- Industry Index Based On Value Line Machinery Index.

12
<PAGE> 15

PENSION PLAN TABLE

The following table presents information regarding estimated annual
benefits payable as a straight life annuity upon retirement to executives named
in the Summary Compensation Table.

<TABLE>
<CAPTION>
FINAL THREE YEARS OF CREDITED SERVICE AT RETIREMENT
YEAR AVERAGE -----------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30 OR MORE
------------ -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$100,000........................... $ 14,201 $ 28,401 $ 42,602 $ 42,602 $ 42,602 $ 42,602

200,000........................... 30,001 60,001 90,002 90,002 90,002 90,002

300,000........................... 45,801 91,601 137,402 137,402 137,402 137,402

400,000........................... 61,601 123,201 184,802 184,802 184,802 184,802

500,000........................... 77,401 154,801 232,202 232,202 232,202 232,202

600,000........................... 93,201 186,401 279,602 279,602 279,602 279,602

700,000........................... 109,001 218,001 327,002 327,002 327,002 327,002

800,000........................... 124,801 249,601 374,402 374,402 374,402 374,402

900,000........................... 140,601 281,201 421,802 421,802 421,802 421,802
</TABLE>

Covered compensation is based on salary and bonus as shown in the Summary
Compensation Table, except that, prior to January 1, 1997, covered compensation
excluded Management Incentive Compensation Plan ("MIC") payments to the employee
during the calendar year in excess of 50% of the employee's basic rate of pay in
effect on the December 31 preceding the date of payment. The 1996 compensation
covered by the plans includes MIC compensation paid during 1996 based on 1995
awards.

Federal regulations require that no more than $150,000 in compensation be
considered for the calculation of retirement benefits from the qualified plan in
1996. The maximum amount paid from a qualified defined benefit plan cannot
exceed $120,000 per year as of January 1, 1996. The Company previously adopted a
Supplemental Executive Retirement Plan (SERP) to address these limitations. The
SERP is a nonqualified supplemental pension plan for designated executive
officers that provides increased benefits that would otherwise be denied because
of certain Internal Revenue Code limitations on qualified benefit plans.

For each of the following officers of Kaydon, the Years of Credited Service
under the plans, as of December 31, 1996, and the compensation received during
1996 covered by the plans were, respectively: Mr. Cawley, 11 years and $845,000;
Mr. Clough, 11 years and $675,000; and Mr. Brocci, 8 years and $275,534.

The amounts reported in this Pension Plan Table are the amounts payable at
the normal retirement age of 65, in the form of a single life annuity, from the
Company's qualified pension plan and Supplemental Executive Retirement Plan for
officers and other key executives. The amounts shown are not subject to
reduction for Social Security benefits but are reduced by any pension benefits
payable from other Company plans. A participant may retire as early as age 55,
but benefits payable at early retirement are subject to reductions that
approximate actuarial values (except that benefits under the SERP are not
reduced on retirement at age 62 or later).

PROPOSAL TO AMEND THE KAYDON CORPORATION
1993 STOCK OPTION PLAN

In 1993, in order to be in a position to continue to effectively attract
and retain employees and directors, the Board of Directors adopted the Kaydon
Corporation 1993 Stock Option Plan (the "1993 Stock Option Plan"), subject to
the approval of the stockholders at the 1993 Annual Meeting of Stockholders. The
stockholders approved the 1993 Stock Option Plan at the 1993 Annual Meeting. The
1993 Stock Option Plan as originally approved by stockholders did not contain
any limit on the maximum number of shares for which an Option may be granted to
an individual in any year.

13
<PAGE> 16

In January, 1997, the Board of Directors proposed amendments to the 1993
Stock Option Plan which limit the maximum number of shares for which options may
be granted to an individual in any year, provide a minimum exercise price in
certain circumstances and make certain other changes in the Plan to conform to
changes in the law. The Board of Directors also directed that the amendments be
submitted to the stockholders for approval at the Annual Meeting. A copy of the
Plan as proposed to be amended is attached as Exhibit A to this Proxy Statement.
The following description of the Plan and the proposed amendments to the Plan
are qualified by reference to Exhibit A.

DESCRIPTION OF THE PROPOSED AMENDMENTS

The proposed amendments to the Plan (the "Amendments") recommended by the
Board of Directors (i) limit the number of shares of Common Stock which may be
subject to an Option granted to a participant in one year; (ii) provide for a
minimum option exercise price in certain circumstances; and (iii) make certain
conforming changes to the Plan in accordance with recent amendments to Section
162(m) of the Internal Revenue Code. The Amendments and the material changes
which the Amendments would make to the Plan are summarized below.

Limits on Options to Participants. The Plan as in effect prior to the
Amendments does not contain any limits on the maximum or minimum number of
shares for which Options may be granted, except that the aggregate fair market
value of the Common Stock subject to incentive stock options that are
exercisable for the first time in any calendar year may not exceed $100,000.
Section 162(m) of the Internal Revenue Code now requires that a limit be placed
on the number of shares for which Options may be granted to a participant in a
year in order for income recognized in connection with the Options to be
deductible as "performance-based compensation". Under the Amendment, to maintain
the deductibility of compensation paid pursuant to the Plan under Section 162(m)
of the Code, no participant will be entitled to receive a grant of Options with
respect to more than 75,000 shares of Common Stock in any year.

To effect this, a new subsection (a) is proposed to be added to Section 3.3
of the Plan as follows:

(a) Per Participant. No Participant shall be granted, during any
calendar year, Options with respect to more than 75,000 shares of Common
Stock available under the Plan, subject to adjustment as provided in
Section 5.1 of the Plan. The purpose of this Section 3.3(a) is to ensure
that the Plan provides performance-based compensation under Section 162(m)
of the Code and this Section 3.3(a) shall be interpreted, administered and
amended if necessary to achieve that purpose.

Option Price. The Plan as in effect prior to the Amendments does not
specify a minimum option exercise price for non-qualified stock options issued
under the Plan. Under the Amendments, to maintain the deductibility of
compensation paid pursuant to the Plan under Section 162(m) of the Code, the
option price of Options granted under the Plan intended to qualify as
performance-based compensation under Section 162(m) may not be less than the
fair market value per share on the date of the grant.

To effect this, a new subsection (f) is proposed to be added to Section 4.1
of the Plan as follows:

(f) Option Price. The Option Price of an Option which is intended to
be issued as performance-based compensation under Section 162(m) of the
Code shall not be less than the fair market value per share on the date of
the grant.

The Board of Directors believes that the Amendments are appropriate and
will enhance the purposes of the Plan by enhancing the ability of the Company to
continue to provide incentives to its key employees to induce qualified
individuals to serve as, or remain, employees of the Company and to promote the
best interests of the Company. The Board of Directors recommends stockholder
approval of the Amendments.

SUMMARY OF THE 1993 STOCK OPTION PLAN

The following general description of certain features of the 1993 Stock
Option Plan as amended is qualified in its entirety by reference to the copy of
the Plan as proposed to be amended, attached as Exhibit A.

14
<PAGE> 17

Under the 1993 Stock Option Plan, as amended, a Committee of at least two
non-employee directors may grant Options to the employee-directors, officers and
other key employees of Kaydon and its affiliates. There are presently two
employee/officer-directors, one other officer and approximately 2,100 other
employees of Kaydon and its affiliates. The number of employees expected to
receive options is limited to approximately 15% of the total eligible group.

The maximum number of shares subject to the Plan is 1,000,000. The
Committee may make equitable adjustments in the number of shares of Common Stock
that may be granted and the price of any Option in the event of a
recapitalization or other change in the corporate structure of Kaydon or the
Common Stock. As of February 24, 1997, there were 18,051,865 shares of Common
Stock outstanding (including treasury shares). The market value of a share of
Common stock on February 24, 1997 was $42.75.

The 1993 Stock Option Plan as amended will generally be administered by the
Committee, whose members may neither hold nor be granted Options under this
Plan. The Committee determines the employees who are to be granted Options, the
terms of the Options and the consideration to be received by Kaydon, based upon
the positions and responsibilities of the employees being considered, the nature
and value of their services and their accomplishment and potential contributions
to the success of Kaydon. It is not possible to state the number of employees
who will be eligible to receive grants since the selection of participants rests
within the discretion of the Committee. In addition, the 1993 Stock Option Plan
as amended authorizes the Committee to appoint a Stock Awards Committee which is
empowered to make grants to employees who are not subject to the reporting
requirements of Section 16(a) of the Act at the time of the grant.

Options entitle the holder to purchase shares of Common Stock at a price
determined by the Committee. As amended, for Options intended to qualify as
performance-based compensation under Section 162(m) of the Code, that price may
not be less than the fair market value per share on the date of the grant.
Options may be granted in the form of incentive stock options or options which
do not qualify for treatment as incentive stock options. Payment of the option
price must be made in cash or, with the consent of the Committee, in whole or in
part in Common Stock or other consideration.

In the event of certain corporate events or a change of control of Kaydon
(as defined in the 1993 Stock Option Plan), the exercisability of Options is
accelerated. The Committee also has general authority to accelerate the
exercisability of Options in its discretion.

Generally, options expire ten years after the grant. However, the Committee
has discretion to establish the terms of Options and, in general, the Company's
practice under the Plan has been to grant Options exercisable in five annual
installments first exercisable one year after grant. An individual whose
employment terminates may generally exercise an Option within thirty days after
termination, and only if and to the extent that the Option was then exercisable,
but in no event after the expiration of its original term. For an individual
whose death occurs while the individual is employed, the period during which an
Option may be exercised is, generally, nine months after death, but in no event
after the expiration of its original term. The Committee may also accelerate the
exercisability of options in those circumstances.

The 1993 Stock Option Plan may be amended or terminated by the Board of
Directors. However, no amendment which would require approval of the
Stockholders as a condition of compliance with Rule 16b-3 of the Act may be made
with the approval of the Stockholders. No amendment or termination of the 1993
Stock Option Plan may, with the consent of the participant, impair the rights of
a participant with respect to Options granted prior to such amendment or
termination.

No Options may be granted under the 1993 Stock Option Plan after April 20,
2003.

ADDITIONAL INFORMATION

The securities underlying the Options are Common Stock, $.10 par value, of
the Company. No consideration will generally be received by Kaydon or any
subsidiary for the granting of the Options, but consideration will be received
upon exercise, as described above.

15
<PAGE> 18

The amount of Options received for 1996 is set forth in the tables to this
Proxy Statement entitled "Option/SAR Grants in Last Fiscal Year." The amount of
Options to be received by the named employees, the current executive officers as
a group, and all employees, including all current officers who are not executive
officers, as a group, is not determinable. The Plan as amended now limits each
participant to a grant of Options with respect to no more than 75,000 shares of
Common Stock in any year. 490,950 Options have at this time been received under
the Plan.

FEDERAL INCOME TAX CONSEQUENCES OF
THE 1993 STOCK OPTION PLAN

The grant or exercise of an incentive stock option will not generally cause
realization of income by the optionee; however, the amount by which the fair
market value of a share of Common Stock at the time of exercise of an incentive
stock option exceeds the option price will be included in determining the
optionee's "alternative minimum taxable income" for purposes of the alternative
minimum tax. In the event of a sale of the shares received upon exercise of an
incentive stock option more than two years from the date of grant and more than
one year from the date of exercise, any appreciation of the shares received
above the exercise price should qualify as long-term capital gain.

The grant of an Option that is not an incentive stock option (a
"non-qualified option") should not result in realization of income by the
optionee. Upon exercise of a non-qualified option by an employee, the excess of
the fair market value of the shares on the exercise date over the option price
should be considered compensation taxable as ordinary income to the employee. In
the event of a sale of the shares, any appreciation after the date of exercise
should qualify as a capital gain.

Subject to the limits on deductibility of employee remuneration under
Section 162(m) of the Code, in general, Kaydon will be entitled to a deduction
for Federal income tax purposes at the same time and in the same amount as the
ordinary income realized by the employee, provided any Federal income tax
withholding requirements are satisfied. If the holding period requirements
outlined above in connection with an incentive stock option are satisfied, no
deduction will be available to Kaydon. Options granted to executive officers
under the Plan are intended to qualify as performance-based compensation for
purposes of Section 162(m) of the Code, and the Company will generally be
entitled to a tax deduction in the amount recognized by such officers upon
exercise of the options. No tax authority or court has ruled on the
applicability of Section 162(m) to the Plan and any final determination of the
deductibility of amounts realized upon exercise of an option granted under the
Plan could ultimately be made by the Internal Revenue Service or a court having
final jurisdiction with respect to the matter. The Company retains the right to
grant options under the Plan in accordance with the terms of the Plan regardless
of any final determination as to the applicability of Section 162(m) of the Code
to these grants.

VOTE REQUIREMENT

The proposal to amend the 1993 Stock Option Plan is recommended for
approval by the Board of Directors and requires the affirmative vote of a
majority of the shares represented in person or by proxy at the meeting at which
a quorum is present. The presence in person or by proxy of the holders of record
of a majority of the shares entitled to vote at a meeting of the stockholders
constitutes a quorum. Votes are counted at the meeting by the Inspector of
Elections. Proxy direction to abstain from voting on the proposal is not counted
as either for or against the proposal. Broker non-votes will not be counted for
or against the proposal.

INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors of Kaydon has selected Arthur Andersen LLP
independent public accountants, to audit Kaydon's consolidated financial
statements for the year ending December 31, 1996. A representative of Arthur
Andersen LLP will be present at the Annual Meeting of Shareholders with an
opportunity to make a statement, if desired, and will be available to respond to
appropriate questions from shareholders present.

16
<PAGE> 19

PROPOSALS BY HOLDERS OF COMMON STOCK

Any proposal which a shareholder of Kaydon desires to have included in the
proxy relating to the 1998 Annual Meeting of Shareholders must be received by
Kaydon at its Corporate offices (sent to the attention of the Corporate
Secretary) no later than October 31, 1997. The Corporate offices of Kaydon are
located at 19345 U.S. 19 North, Suite 500, Clearwater, Florida 34624-3148.

EXPENSES AND OTHER MATTERS

EXPENSES OF SOLICITATION

Kaydon will pay the costs of preparing, assembling and mailing this proxy
statement and the material enclosed herewith. Kaydon has requested brokers,
nominees, fiduciaries and other custodians who hold shares of its common stock
in their names to solicit proxies from their clients who own such shares, and
Kaydon has agreed to reimburse them for their expenses in so doing.

In addition to the use of the mails, certain officers, directors and
regular employees of Kaydon, at no additional compensation, may request the
return of proxies by personal interview or by telephone or telegraph.

OTHER ITEMS OF BUSINESS

The management does not intend to present any further items of business to
the meeting, and knows of no such items which will or may be presented by
others. However, if any other matter properly comes before the meeting, the
persons named in the enclosed proxy form will vote thereon in such manner as
they may in their discretion determine.

John F. Brocci
Vice President Administration and
Secretary

March 5, 1997

PLEASE SIGN, DATE AND IMMEDIATELY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ADDRESSED ENVELOPE.

17
<PAGE> 20

EXHIBIT A

KAYDON CORPORATION
1993 STOCK OPTION PLAN
(AS AMENDED THROUGH APRIL 25, 1997)

ARTICLE I

PURPOSES OF PLAN

1.1 Purposes. The purposes of the Kaydon Corporation 1993 Stock Option
Plan are to provide additional incentive to selected officers and other
employees of the Company, to recognize and reward their efforts and
accomplishments in order to strengthen the desire of employees to remain with
the Company and to stimulate their efforts on behalf of the Company, to help
attract and retain competent persons and, by encouraging ownership of a stock
interest in the Company, to gain for the Company the advantages inherent in
employees having a greater personal financial investment in the Company.

ARTICLE II

DEFINITIONS

2.1 Definitions. The following definitions apply unless the context
clearly indicates otherwise:

Act: The Securities Exchange Act of 1934, as amended.

Affiliate: Any corporation, partnership, association, joint-stock
company, business trust, joint venture or unincorporated organization
controlled, directly or indirectly, by Kaydon Corporation.

Board of Directors (or Board): The Board of Directors of Kaydon
Corporation.

Change of Control: A circumstance in which:

(a) Ownership. Any person (as used in Sections 13(d) and 14(d)(2)
of the Act), including a "group" (as defined in Section 13(d)(3) of the
Act) becomes the beneficial owner (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of Kaydon representing 35%
or more of the shares of Common Stock of the Company;

(b) Control. In connection with any cash tender offer, exchange
offer, contested election, merger, consolidation, reorganization (other
than any merger, consolidation or reorganization which is otherwise
subject to the provisions of Section 4.7), sale or other disposition of
all or substantially all the assets of the Company, or other similar
transaction, persons who were directors of the Company prior to the
commencement of any such offer or prior to any vote of the shareholders
of the Company on any such contested election or other transaction, as
the case may be, cease to constitute a majority of the Board; or

(c) Filing. The Company files with the Securities and Exchange
Commission a report on Form 8-K reporting a change in control pursuant
to Item 1.

Closing Price: The closing price of the Common Stock of the Company
on the listing of National Association of Securities Dealers (NASDAQ)
National Market Issues.

Code: The Internal Revenue Code of 1986, as amended.

Committee: The committee appointed under Section 6.1 to administer
the Plan.

Common Stock: Common Stock, par value $.10 per share, of Kaydon
Corporation.

Company: Kaydon Corporation and its Affiliates.

Director: Any member of the Board of Directors who is not an employee
of the Company or any of its Subsidiaries or Affiliates.

A-1
<PAGE> 21

Effective Date: The date specified in Article IX.

Employee: Officers and other key employees of the Company or any of
its Affiliates (including individuals who are also members of the Board of
Directors).

Fair Market Value: The Closing Price for Common Stock at the close of
the day preceding the grant or, if the Common Stock is not traded on that
date, as of the first preceding date on which the Common Stock so traded.

Grantee: A Participant to whom an Option has been granted.

Kaydon: Kaydon Corporation or any successor to it in ownership of
substantially all of its assets, whether by merger, consolidation or
otherwise.

Option: The grant to Participants of options to purchase shares of
Common Stock in accordance with the provisions of Articles III and IV.

Optionee: A Participant to whom one or more Options have been granted
in accordance with the provisions of Articles III and IV.

Option Period: The period of time during which an Option may be
exercised.

Option Price: The price per share payable to the Company for shares
of Common Stock upon the exercise of an Option.

Participant: Each Employee to whom an Option is granted under the
Plan.

Plan: The Kaydon Corporation 1993 Stock Option Plan.

Plan Year: The calendar year.

Reporting Person: A person subject to the reporting requirements of
Section 16(a) of the Act.

Secretary: The Secretary of Kaydon Corporation.

Spread Value: With respect to a share of Common Stock subject to an
Option an amount equal to the excess of the Fair Market Value over the
Option Price.

Subsidiary: Any corporation (other than Kaydon) in an unbroken chain
of corporations beginning with and including Kaydon if, at the time of
granting of an Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the
other corporations in the chain.

ARTICLE III

ELIGIBILITY AND GRANTS

3.1 Eligibility. The Committee determines the Employees to be granted
Options and the number of shares involved. Each grant must be evidenced by a
written instrument duly executed by or on behalf of the Company.

(a) Number of Options. The Committee may grant more than one Option to an
individual during the life of the Plan.

(b) Special Circumstances. Subject to the requirements of Section 422 of
the Code with respect to incentive stock options, an Option may be in addition
to, in tandem with, or in substitution for options previously granted under the
Plan or under another stock plan of the Company or of another corporation and
assumed by the Company.

(c) Voluntary Surrender. The Committee may permit the voluntary surrender
of all or a portion of any Option granted under the Plan or any prior plan
conditioned upon the granting to the Employee of a new Option for the same or a
different number of shares as the Option surrendered, or may require surrender
as a

A-2
<PAGE> 22

condition precedent to a grant of a new Option to the Employee. In that
circumstance, the new Option shall be exercisable at the price, during the
period, and in accordance with any other terms or conditions specified by the
Committee at the time the new Option is granted.

3.2 Types of Options. The Committee may grant incentive stock options as
defined in Section 422 of the Code, options not qualifying under Section 422 of
the Code, or both, in its discretion. The status of each Option must be
identified in the Option agreement.

3.3 Share Limitation. The maximum number of shares of Common Stock which
may be issued upon the exercise of Options granted under the Plan is 1,000,000
shares.

(a) Per Participant. No Participant shall be granted, during any calendar
year, Options with respect to more than 75,000 shares of Common Stock available
under the Plan, subject to adjustment as provided in Section 5.1 of the Plan.
The purpose of this Section 3.3(a) is to ensure that the Plan provides
performance-based compensation under Section 162(m) of the Code and this Section
3.3(a) shall be interpreted, administered and amended if necessary to achieve
that purpose.

(b) General. Shares of Common Stock issued under the Plan may be either
authorized and unissued shares or issued shares reacquired by the Company. If
any Option granted under the Plan expires, terminates, or is cancelled for any
reason without having been exercised in full, the corresponding number of
unpurchased shares are available for future grants under the Plan.

3.4 Grant. The grant of an Option occurs on the date the Committee or the
Stock Awards Committee, by resolution, selects an Employee as a Participant in
any grant of an Option, determines the number of shares to be subject to the
Option granted to the Employee and specifies the terms and provisions of the
Option. The Company shall notify a Participant of a grant of an Option.

ARTICLE IV

GENERAL TERMS OF OPTIONS

4.1 Terms. The Committee determines the consideration to the Company for
the granting or exercise of Options under the Plan and the conditions, if any,
which it deems appropriate to ensure that the consideration will be received by,
or will accrue to, the Company. The Committee has complete discretion, within
the terms of the Plan, to vary the consideration for Options granted under the
Plan at the same time or from time to time. The Committee must fix the Option
Price, subject to adjustment under Section 5.1.

(a) Installments. Options are exercisable over the Option Period
determined by the Committee at the times and in the amounts determined by the
Committee at the time each Option is granted. The shares covered by an Option
may be purchased in such installments and on such exercise dates as the
Committee may determine. Except as otherwise provided in the Plan or an option
agreement, any shares not purchased on the applicable exercise date may be
purchased thereafter at any time prior to the final expiration of the Option.
The Committee may, in its sole discretion, and subject to the terms and
conditions it adopts, accelerate the date or dates on which some or all
outstanding Options may be exercised.

(b) Term. The term of each Option shall be fixed by the Committee, but no
Option shall be exercisable more than ten years after the date the Option is
granted. Notwithstanding any other provision contained in this Plan, no Option
is exercisable after the expiration of the Option Period.

(c) First Exercisability. Except as otherwise provided or determined by
the Committee, no Option shall be exercisable prior to the first anniversary
date of the grant of the Option.

(d) Continuing Exercisability. Except as provided in Sections 4.5, 4.6 and
4.7, no part of an Option may be exercised unless the Optionee is then in the
employ of the Company and was continuously so employed since the date of the
grant of such Option or for the period of time specified by the Committee.

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(e) Exercise. Except as otherwise provided by the Committee, Options are
exercised by submitting to the Company a signed notice of exercise in a form to
be supplied by the Company. The exercise of an Option is effective on the date
the Company receives the notice at its principal corporate offices.

(f) Option Price. The Option Price of an Option which is intended to be
issued as performance-based compensation under Section 162(m) of the Code shall
not be less than the fair market value per share on the date of the grant.

4.2 Incentive Stock Options. Options granted in the form of incentive
stock options shall be subject, in addition to the foregoing provisions, to the
following provisions:

(a) Annual Limit. To the extent that the aggregate fair market value
(determined at the time of grant) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by an Optionee
during any calendar year (under the Plan or under any other stock plan of
the Company) exceeds $100,000, such options shall be treated as options
which are not incentive stock options.

(b) Ten Percent Shareholder. No incentive stock option shall be
granted to any individual who, at the time of the proposed grant, owns
Common Stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of Kaydon or any Subsidiary.

(c) Option Period. No incentive stock option shall be exercisable
after the expiration of ten years from the date of grant.

(d) Option Price. The Option Price of an incentive stock option shall
not be less than the greater of the Fair Market Value and the fair market
value per share on the date of grant.

(e) Subsidiary. Incentive stock options may be granted only to
employees of Kaydon and its Subsidiaries.

(f) Aggregate Limit. The aggregate number of shares of Common Stock
which may be issued pursuant to the exercise of incentive stock options
shall not exceed the number of shares determined in accordance with the
share limitation specified in Section 3.3 hereof.

The Company intends that Options designated by the Committee as incentive
stock options shall constitute incentive stock options under Section 422 of the
Code. Should any of the foregoing provisions not be necessary in order to so
comply or should any additional provisions be required, the Committee may amend
the Plan accordingly, without the necessity of obtaining the approval of
stockholders of Kaydon.

4.3 Option Agreements. The Company shall effect the grant of Options under
the Plan, in accordance with determinations made by the Committee, by execution
of written instruments on a form approved by the Committee. Each Option shall
contain the terms and conditions (which need not be the same for all Options,
whether granted at the same time or at different times) which the Committee
deems appropriate. As examples of the Committee's authority in this regard,
certain stock option agreements may contain:

(a) Representation. A requirement that the holder of an Option
represent to the Company in writing, when the Option is granted or when the
holder purchases shares of Common Stock on its exercise, that the holder is
accepting the Option, or purchasing shares (unless they are then covered by
an effective registration statement under the Securities Act of 1933) for
the holder's own account for investment and not with a view to distribution
or with any present intention of reselling any;

(b) Payment. A provision under which the Company, in the discretion
of the Committee, has the right or obligation, in lieu of accepting payment
of the option price and delivering any or all shares of Common Stock as to
which an Option has been exercised, to elect to pay the holder of the
Option an amount in cash or shares of Common Stock equal to the amount by
which the fair market value of the shares of Common Stock on the date of
exercise exceeds the purchase price that would otherwise be payable by the
holder of the Option to acquire the shares of Common Stock;

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(c) Repurchase. A provision under which the Company may have either
the right or the obligation, or both, to repurchase shares of Common Stock
sold under the Plan at a price not to exceed the higher of (i) the option
price for such shares, plus twice the increase, if any, in the book value
of such shares from the date of the grant of the Option to the date of such
repurchase, and (ii) the fair market value of the shares at the time of
repurchase;

(d) Hardship. A provision limiting the exercise of the Option for the
period provided under the hardship distribution provisions of the Kaydon
Corporation Employee Stock Ownership and Thrift Plan or other Company,
Subsidiary, or Affiliate plans to the extent the holder receives a hardship
distribution from that plan; and

(e) Cause. A limitation that all rights under the Option expire upon
receipt of notice of termination of a Grantee's employment for deliberate,
willful or gross misconduct, as determined by the Company.

4.4 Non-Transferability of Option. No Option granted under the Plan to an
Employee is transferable by the Employee other than by will or by the laws of
descent and distribution or, in the case of a non-qualified stock option,
pursuant to a "qualified domestic relations order" (as defined in the Code).
Each Option is exercisable during the Employee's lifetime only by the Employee
or, in the case of a non-qualified stock option, an alternate payee pursuant to
a qualified domestic relations order.

4.5 Termination of Employment. An Optionee whose employment with the
Company, Subsidiaries and any parent corporation terminates by reason other than
death is entitled to exercise the then unexercised Options or installments of
Options only within the thirty day period after the date of the termination of
employment. That exercise remains subject to:

(a) Option Period. The earlier expiration of the Option Period;

(b) Exercisability. The requirement that the Optionee was entitled to
exercise the Option at the date of the termination of employment; and

(c) Other. The limitations, if any, imposed by the Committee with
respect to the percent of the total number of shares to which the Option
relates which may be purchased from time to time during the Option Period
which have not been removed.

Notwithstanding limitation (b), in the case of termination of employment by
reason of retirement or a disability within the meaning of Section 105(d)(4) of
the Code, the Committee may, in its discretion, accelerate the exercisability of
any installments of an Option which would not be or were not exercisable on the
date of termination. In addition, in the case of termination of employment due
to a disability within the meaning of Section 105(d)(4) of the Code, the thirty
day period shall be twelve months, subject to earlier expiration of the Option
Period.

4.6 Death of Optionee. The estate of an Optionee who dies or a person who
acquires the right to exercise an Option by bequest or inheritance or by reason
of the death of the Optionee may exercise the Option only within the nine month
period after the death of the Optionee. That exercise remains subject to:

(a) Option Period. The expiration of the Option Period;

(b) Exercisability. The requirement that the Optionee was entitled to
exercise the Option at the date of death; and

Notwithstanding limitation (b), the Committee may, in its discretion,
accelerate the exercisability of any installments of such Option which were not
exercisable at the time of the holder's death.

4.7 Merger, Consolidation or Change in Control. In the event of any
merger, consolidation or reorganization of the Company with or into another
corporation (other than any merger, consolidation or

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reorganization in which the Company is the surviving or continuing corporation
and which does not result in any change in the outstanding shares of Common
Stock), any sale or other disposition of all or substantially all the assets of
the Company or any liquidation or dissolution of the Company, or a Change in
Control, any outstanding Option not exercisable in full shall (unless the stock
option agreement evidencing such Option expressly provides to the contrary) be
accelerated and become exercisable in full for:

(a) In General. A period of 30 days following receipt by the holder
of such Option of notice of the meeting of shareholders at which such event
is to be approved, whether received before or after such event; and

(b) Change of Control. In the case of a Change in Control, the
remaining term of the Option.

No acceleration shall occur and no attempted accelerated exercise shall be
valid, however, if the Committee, in its discretion, by written notice to the
holders of outstanding Options prior to the event or, in the case of a (b)
Change of Control as defined in Section 2.1, prior to commencement of any such
offer or prior to any vote of the shareholders of the Company on any such
contested election or other transaction referred to in subsection (b) of the
definition of a Change in Control, as the case may be (but not after), cancels
the acceleration of exercisability of all (but not less than all) of such
outstanding Options.

4.8 Payment For Shares. Payment for shares of Common Stock shall be made
in full at the time of exercise of the Option. This requirement shall not
prohibit the Company from making a loan or advance to the Optionee for the
purpose of financing, in whole or in part, the purchase of optioned shares.
Payment of the Option Price shall be made in cash or, with the consent of the
Committee, in whole or in part in Common Stock or other consideration. Payment
may also be made by delivering a properly executed exercise notice together with
irrevocable instructions to a third party to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price.

(a) Holding Period Limitation. The option price may not be paid in shares
of Common Stock received upon the exercise of any Option under the Plan or any
option under another stock option plan of the Company which shares have been
held by the holder for less than one year prior to the payment.

(b) Tax Limitation. The holder of an Option may not pay in shares of
Common Stock the portion of the option price equal to the amount of any
applicable federal, state, and local tax liability required to be withheld at
the time of exercise.

4.9 Cash Out Of Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or a portion of the shares for which an
Option is being exercised by paying the Optionee an amount, in cash or Common
Stock, equal to the Spread Value of such shares on the effective date of the
cash out.

4.10 Legality. The issuance or delivery of any Option or shares of Common
Stock pursuant to an Option may be postponed by the Company for any period
required to comply with any applicable requirements under the Federal securities
laws, any applicable listing requirements of any national securities exchange or
any requirements under any other applicable law or regulation. The Company is
not obligated to issue or deliver any shares if the issuance or delivery
constitutes a violation of any provision of any law or of any regulation of any
governmental authority or any national securities exchange. By way of example:

(a) Listing and Other Conditions. As long as the Common Stock is
listed on the listing of National Association of Securities Dealers
National Market Issues, the issue of any shares of stock pursuant to an
Option is conditioned on the shares to be issued being listed on that
Exchange.

(b) Legality. If at any time counsel to Kaydon is of the opinion that
any sale or delivery of shares of Common Stock pursuant to an Option is or
may in the circumstances be unlawful under the statutes, rules or
regulations of any applicable jurisdiction, Kaydon shall have no obligation
to make such sale or delivery, or to make any application or to effect or
to maintain any qualification or registration under the Securities Act of
1933, as amended, or otherwise with respect to shares of Common Stock or
Options. The right to exercise any Option shall be suspended until, in the
opinion of that counsel, the sale or delivery is lawful. Upon termination
of any period of suspension under this Section 4.10, any Option affected by
the suspension which had not then expired or terminated shall be reinstated
as to all shares

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available before the suspension and as to shares which would otherwise have
become available during the period of suspension. No such suspension shall
extend any Option Period, however.

ARTICLE V

ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION

5.1 Adjustments. In the event of a recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation, rights
offering, reorganization, liquidation, or the sale, conveyance, lease or other
transfer by Kaydon of all or substantially all of its property, or any other
change in the corporate structure or shares of Kaydon, the Committee may make
equitable adjustments (by means of a grant of a substitute Option or an
additional Option or otherwise) to prevent dilution or enlargement of rights as
it deems appropriate.

(a) Examples. The adjustments may include adjustments in the number and
class of shares authorized to be granted (including adjustment to the share and
per participant limitations of Section 3.3), in the number and kind of shares
available under any outstanding Options (including substitution of shares of
another corporation) and in the price of any Option.

(b) Limitation. In no event, however, may any change be made to an
incentive stock option which would constitute a "modification" within the
meaning of Section 425(h)(3) of the Code.

(c) Options. Options granted under the Plan shall contain provisions
consistent with the foregoing with respect to adjustments to be made in the
number and kind of shares covered thereby and in the Option Price in the event
of any such change.

ARTICLE VI

ADMINISTRATION

6.1 Administration. The Plan shall be administered by a committee
consisting of not less than two members of the Board of Directors, who shall be
appointed by, and shall serve at the pleasure of, the Board of Directors. All of
the members of the Committee shall be "non-employee directors" as defined in
Rule 16b-3 issued under the Act and "outside directors" as defined in the
regulations under Section 162(m) of the Code.

(a) Action. A majority of the Committee constitutes a quorum. The acts of
a majority of the members, expressed from time to time by a vote at a meeting
(including a meeting held by telephone conference call or in which one or more
members of the Committee participate by telephone), or acts approved in writing
by all of the members of the Committee, are the acts of the Committee.

(b) Discretion. In addition to the Committee's discretionary authority
described in other Articles of the Plan, the Committee has discretionary
authority to construe and interpret the Plan and is authorized to establish
rules and regulations for the proper administration of the Plan as it deems
advisable which are not inconsistent with the provisions of the Plan. All
questions arising under the Plan or under any rule or regulation with respect to
the Plan adopted by the Committee, whether involving an interpretation of the
Plan or otherwise, shall be decided by the Committee. Its decisions shall be
conclusive and binding in all cases.

(c) Authority. Except as limited in this Plan or as may be necessary to
assure that this Plan provides performance-based compensation under Section
162(m) of the Code, the Committee shall have all of the express and implied
powers and duties set forth in this Plan. The Committee has discretionary
authority to determine the Employees to whom Options under the Plan are to be
granted, the terms and conditions applicable and the number of shares to be
covered by each Option. In selecting the individuals to whom Options are
granted, as well as in determining the terms and conditions and the number of
shares subject to each grant, the Committee may consider the positions and
responsibilities of the Employees being considered, the nature of the services
and accomplishments of each, the value to the Company of their services, their
present and potential contribution to the success of the Company, the
anticipated number of years of service

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remaining and any other factors the Committee deems relevant. The Committee may
obtain advice or assistance it deems appropriate from persons not serving on the
Committee.

(d) Assistance. The Committee may authorize any one or more of their
number or any officer of the Company to execute and deliver documents on behalf
of the Committee, provided that no delegation may be made that would cause
grants, awards or other transactions under the Plan to cease to be exempt from
Section 16(b) of the Act.

6.2 Stock Awards Committee. In addition, and not in limitation of the
authority of the Committee, a Stock Awards Committee may grant Options in
accordance with the provisions of the Plan to Employees who, at the time of the
grant, are not Reporting Persons. The Stock Awards Committee shall be appointed
by, and shall serve at the pleasure of, the Committee.

(a) Action. A majority of the Stock Awards Committee constitutes a quorum.
The acts of a majority of the members, expressed from time to time by a vote at
a meeting (including a meeting held by telephone conference call or in which one
or more members of the Stock Awards Committee participate by telephone), or acts
approved in writing by all of the members of the Stock Awards Committee are the
acts of the Stock Awards Committee.

(b) Limitation. Notwithstanding the foregoing, the Stock Awards Committee
may not undertake any action which the provisions of Rule 16b-3 under the Act
require to be undertaken by non-employee directors (as defined in the Rule) as a
condition of the continued qualification of the Plan (and transactions
thereunder) under Rule 16b-3.

6.3 Indemnification of Board and Committee. No member of the Board, the
Committee, or the Stock Awards Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
under the Plan.

(a) Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board, the Committee, or the Stock Awards
Committee, the members of the Board, the Committee, or the Stock Awards
Committee shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan, or any Option granted thereunder,
and against all amounts paid by them in settlement thereof (provided the
settlement is approved by legal counsel selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except a
judgment based upon a finding of bad faith.

(b) Procedure. Upon the institution of any such action, suit or
proceeding, a Board, Committee, or Stock Awards Committee member shall notify
the Company, in writing, giving the Company an opportunity, at its own expense,
to handle and defend the same before the Board, Committee, or Stock Awards
Committee member undertakes to handle it on the individual's own behalf.

ARTICLE VII

TERMINATION OR AMENDMENT OF THE PLAN

7.1 Termination or Amendment. The Board may at any time terminate the Plan
and may from time to time alter or amend the Plan or any part thereof (including
but not limited to any amendment to take into account changes in law and tax and
accounting rules, or deemed necessary to ensure that the Company complies with
any regulatory requirement referred to in Article IV or with the requirements of
Section 16 of the Act and Rule 16b-3 promulgated pursuant to the Act).
Notwithstanding that general rule:

(a) Participant Limitation. Unless otherwise required by law, the
rights of a Participant with respect to Options granted prior to the
termination, alteration or amendment may not be impaired without the
consent of the Participant; and,

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<PAGE> 28

(b) Stockholder Limitation. Without the approval of the Company's
stockholders, no alteration or amendment may be made which would require
approval of the stockholders as a condition of compliance with Rule 16b-3
under the Act.

ARTICLE VIII

MISCELLANEOUS

8.1 No Right To Employment. The existence of the Plan or an Option shall
not confer upon any employee any right to continued employment nor shall it
interfere in any way with the right of the Company, a Subsidiary or Affiliate to
terminate the employment of any employee at any time.

8.2 Optionees and Grantees Not Stockholders. An Optionee, Grantee, or
legal representative has none of the rights of a stockholder with respect to
shares subject to Options until the Option is exercised and shares are issued
upon exercise of the Option.

8.3 Withholding of Taxes. The Company has the right to require, prior to
the issuance or delivery of any shares of Common Stock or any payment under the
Plan, payment by the Participant of any taxes required by law.

(a) Withholding. The Committee may permit a withholding obligation to be
satisfied by reducing the number of shares of Common Stock otherwise
deliverable. A Reporting Person may elect to have a sufficient number of shares
of Common Stock withheld to fulfill such tax obligations (a Withholding
Election) only if the election is approved by the Committee.

(b) Fractional Shares. Any fraction of a share of Common Stock required to
satisfy a tax obligation shall be disregarded and the amount due must be paid
instead in cash by the Participant.

8.4 No Assignment of Benefits. Except as previously provided with respect
to a qualified domestic relations order, no benefits payable under the Plan are,
except as otherwise specifically provided by law, subject in any manner to
anticipation, alienation, attachment, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, attach, sell,
transfer, assign, pledge, encumber or charge any benefit is void. Any benefit
shall not in any manner be liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person who is or will be entitled to
the benefit, nor is it subject to attachment or legal process for or against
such person. If any person entitled to a benefit hereunder is adjudicated a
bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge a benefit, or if any attempt is made to subject any benefit
to the debts, contracts, liabilities, engagements or torts of any person
entitled to the benefit, then the benefit shall, in the discretion of the
Committee, cease and terminate. In that event the Committee may cause the
benefit, or any part thereof, to be held or applied for the benefit of the
person, his or her spouse, children or other dependents, or any of them, in the
manner and proportion as the Committee determines.

8.5 Governing Law. 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).

8.6 Other Plans. Nothing contained in this Plan shall prevent the Company
from adopting additional compensation plans or arrangements.

8.7 Federal Securities Law. Notwithstanding any other provision of the
Plan, no transaction shall be given effect on any date which would, in the
opinion of counsel to the Company, result in liability under Section 16(b) of
the Act.

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ARTICLE IX

EFFECTIVE DATE; TERM OF PLAN

9.1 Effective Date. The Plan is conditioned on the approval of the
stockholders of Kaydon at the Annual Meeting of Stockholders on April 21, 1993.
The Plan is effective upon the affirmative vote of the holders of a majority of
the shares of Common Stock present, or represented, and entitled to vote at the
meeting.

9.2 Term of Plan. No Options may be granted hereunder after April 21,
2003. This Section 9.2 shall not affect any Option granted prior to such date.

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APPENDIX

PROXY KAYDON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, APRIL 25, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KAYDON CORPORATION

The undersigned hereby appoints LAWRENCE J. CAWLEY and JOHN F. BROCCI, and
each of them, the proxies of the undersigned, with power of substitution in
each, to vote all stock of Kaydon Corporation that the undersigned is entitled
to vote at the Annual Meeting of Shareholders of such Corporation to be held at
Tampa Airport Marriott Hotel, Tampa International Airport, Tampa, Florida on
Friday, April 25, 1997 at 10:00 AM, Eastern time, and at any adjournment
thereof.

Your vote for the proposal to approve an amendment to the Kaydon Corporation
1993 Stock Option Plan and for the five directors may be indicated below. Gerald
J. Breen, Brian P. Campbell, Lawrence J. Cawley, Stephen K. Clough, and John H.
F. Haskell, Jr. have been nominated for election as Directors.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO CONTRARY SPECIFICATION IS INDICATED, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
AS DIRECTORS AND FOR THE PROPOSAL TO AMEND THE STOCK OPTION PLAN (EXCEPT THAT,
FOR PURPOSES OF THE PROPOSAL TO AMEND THE STOCK OPTION PLAN, ABSTENTIONS AND
BROKER NON-VOTES WILL NOT BE COUNTED FOR OR AGAINST THE PROPOSAL). PLEASE MARK
BOX [ ] OR [X] .
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.

1. Election of Directors:

<TABLE>
<S> <C> <C>
[ ] FOR all nominees (except as [ ] AUTHORITY WITHHELD for all. [ ] AUTHORITY WITHHELD for the following only (write
listed to the contrary). each nominee's name in the space below).
</TABLE>

- --------------------------------------------------------------------------------
Name(s)
(Continued and to be signed on the reverse side)

2. Proposal to approve an amendment to the Kaydon Corporation 1993 Stock Option
Plan, as described in the Proxy Statement.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In their discretion, on other matters which properly come before the meeting
or any postponement or adjournment thereof.

You are urged to date, sign, and return promptly this proxy in the envelope
provided. It is important for you to be represented at the Meeting. The
execution of this proxy will not affect your right to vote in person if you are
present at the Meeting and wish to so vote.

Dated: , 1997
--------------------

--------------------------------

Signature

--------------------------------

Signature if held jointly

IMPORTANT: Please sign exactly
as your name or names appear
hereon. If signing as an
attorney, executor,
administrator, trustee,
guardian, or in some other
representative capacity, or as
officer of a corporation, please
indicate your capacity or full
title. For joint accounts, all
tenants should sign.