<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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
KAYDON CORPORATION
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
Tampa, Florida
March 18, 1999
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 30, 1999 at 10:00 a.m. for the following purposes:
(1) to elect a Board of Directors;
(2) to approve the Kaydon Corporation 1999 Long Term Stock Incentive
Plan; 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 Friday, February 26,
1999 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 33764
---------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 1999
---------------------
PROXY STATEMENT
---------------------
March 18, 1999
INTRODUCTION
The Annual Meeting of Shareholders of Kaydon Corporation ("Kaydon") will be
held on Friday, April 30, 1999, 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.
QUORUM AND VOTE REQUIREMENTS
Each Share of common stock represented at the Annual Meeting is entitled to
one vote on each matter properly brought before the meeting.
Participants in the Kaydon Corporation Employee Stock Ownership and Thrift
Plan, the Electro-Tec Corporation Employee Retirement Benefit Plan and the Fluid
Power Companies' 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.
For purposes of determining the presence or absence of a QUORUM for the
transaction of business at the meeting, all shares for which a proxy or vote is
received, including abstentions and shares represented by broker non-votes, will
be counted as present and entitled to vote and they count towards the quorum.
Proxies properly executed, duly returned and not revoked will be voted at
the Annual Meeting (including adjournments) in accordance with the
specifications therein.
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.
Votes are counted at the meeting by the Inspector of Election.
ELECTION OF DIRECTORS (ITEM NO. 1 ON PROXY CARD)
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. Shares
represented by proxies that are marked "withhold authority" with respect to the
election of one or more nominees as Directors, will not be counted in
determining whether a plurality of votes was obtained in such matters. If no
directions are given and the signed card is returned, the members named as
proxies will vote the shares for the election of all listed nominees for
Directors. In instances where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned proxies to
the brokers (so-called "broker non-votes"), and abstentions, those shares will
not be included in the vote totals and, therefore, will have no effect on the
vote.
<PAGE> 4
KAYDON CORPORATION 1999 LONG TERM STOCK INCENTIVE PLAN (ITEM NO. 2 ON PROXY
CARD)
With respect to the proposal to approve Kaydon Corporation's 1999 Long Term
Stock Incentive Plan such approval shall be determined by the affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote on this proposal. For purposes of
counting votes on this proposal, abstentions will have the same effect as votes
against approval of the Plan. Broker non-votes do not affect the approval of the
Plan.
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.
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.
NAME AND AGE OF NOMINEES
- ------------------------
Gerald J. Breen (53)......... Mr. Breen is the Chairman and CEO of IER
Industries, Inc. since 1993. Prior to that Mr.
Breen had been owner, President and Chief
Executive Officer of Cuyam Corporation and a
private investor 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. Mr. Breen also serves on
the Board of Directors of Disposable Products
Company, LLC. He has been a Director of Kaydon
since January 1992.
Brian P. Campbell (58)....... Mr. Campbell has been President and Chief
Executive Officer of Kaydon Corporation since
September 1998. Prior to that he was founder and
President of TriMas Corporation from May 1986 to
January 1998, and from January 1998 to September
1998, President and Co-Chief Operating Officer of
Masco Tech, Inc. 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 (64)...... Mr. Cawley has been Chairman of the Board of
Kaydon Corporation since June 1996, and served as
interim President and Chief Executive Officer
from June 1998 to September 1998. 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. Prior to joining
Kaydon, Mr. Cawley was President and General
Manager of Clevite, a division of Imperial
Clevite Corporation. He has been a Director of
Kaydon since April 1986.
2
<PAGE> 5
Thomas C. Sullivan (61)...... Mr. Sullivan has been Chairman, President and
Chief Executive Officer of RPM, Inc. since 1971.
Mr. Sullivan joined RPM, Inc. as a Divisional
Sales Manager in 1961, was elected Vice President
in 1967 and became an Executive Vice President in
1969. He has been a Director of RPM, Inc. since
1963. Mr. Sullivan is a Director of
Pioneer-Standard Electronics, Inc., National City
Bank, and Huffy Corporation. He has been a
Director of Kaydon since September 1998.
B. Joseph White, Ph.D. (51).. Mr. White is Dean of the University of Michigan
Business School, a position he has held since
1991. Mr. White is a Trustee of Equity
Residential Properties Trust, a national firm
that owns and manages apartment properties. He is
a Director of Kelly Services, Inc., a temporary
services firm, and Gordon Food Service, Inc., a
food distribution company. Mr. White is a
Director of mutual funds managed by Alger
Management, Inc., including the Alger Fund, Alger
American Fund, Alger Retirement Fund, Spectra
Fund, and Castle Convertible Fund.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE PERSONS
NAMED ABOVE AS DIRECTORS OF THE CORPORATION.
DIRECTOR COMPENSATION AND BOARD COMMITTEES
During 1998, Kaydon's Board of Directors met seven times for regular
meetings and two times for a special telephonic meeting. Each outside Director
received $2,000 for each attendance of the Board of Directors regular meeting
and $500 for attendance at each telephonic meeting. Each outside Director was
paid $15,000 as a retainer for the year, paid quarterly. In addition to the
payment of such fees, the Company reimburses all Directors for expenses incurred
in carrying out their duties. 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: Thomas C. Sullivan (Chairman) and Gerald
J. Breen.
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 three times during the
year. The members of the Committee are: Gerald J. Breen (Chairman), and Thomas
C. Sullivan.
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<PAGE> 6
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 Friday, February
26, 1999 are entitled to notice of and to vote at the Annual Meeting. At the
close of business on such date there were 31,960,577 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, 1998,
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.............................. 1,969,700 6.12%
82 Devonshire Street
Boston, MA 02109
NewSouth Capital Management, Inc............. 1,637,787 5.1%
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.
4
<PAGE> 7
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, 1998.
<TABLE>
<CAPTION>
PERCENTAGE OF ISSUED
AMOUNT AND NATURE AND OUTSTANDING
OF BENEFICIAL OWNERSHIP COMMON STOCK ON
BOARD OF DIRECTORS OF COMMON STOCK DECEMBER 31, 1998
- ------------------ ----------------------- --------------------
<S> <C> <C>
Gerald J. Breen.......................................... 15,000(1) *
8271 Bavaria Road
Macedonia, OH 44056
Brian P. Campbell........................................ 106,000(2) *
315 East Eisenhower Parkway, Suite 300
Ann Arbor, MI 48108
Lawrence J. Cawley....................................... 271,453(3) *
19345 U.S. 19 North, Suite 500
Clearwater, FL 33764
Thomas C. Sullivan....................................... 5,000 *
2628 Pearl Road
P.O. Box 777
Medina, OH 44258
OTHER EXECUTIVE OFFICERS
John F. Brocci........................................... 120,340(4) *
19345 U.S. 19 North, Suite 500
Clearwater, FL 33764
All officers and directors as a.......................... 517,793 1.6%
group, 5 persons
</TABLE>
- ---------------
* Less than one percent.
(1) Included in these shares are 10,000 shares which are acquirable under the
Stock Option Plan in 1999.
(2) Included in these shares are 2,000 shares owned by a trust as to which Mr.
Campbell disclaims beneficial ownership, and 30,000 shares which are
acquirable under the Stock Option Plan in 1999.
(3) Included in these shares are 50,000 owned by Mrs. Cawley as to which Mr.
Cawley disclaims beneficial ownership, and 137,500 shares which are
acquirable under the Stock Option Plan in 1999.
(4) Included in these shares are 71,250 shares which are acquirable under the
Stock Option Plans in 1999.
5
<PAGE> 8
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,.............. 1998 $396,827 $333,300 0 0 50,000 0 0
Chairman 1997 $345,000 $451,400 0 0 25,000 0 0
1996 $345,000 $775,500 0 0 110,000 0 0
Brian P. Campbell,............... 1998 $166,154 0 0 0 100,000 0 0
President and Chief 1997 0 0 0 0 0 0 0
Executive Officer 1996 0 0 0 0 0 0 0
Stephen K. Clough,............... 1998 $171,346 $166,625 0 0 0 0 $1,822,606*
President and Chief 1997 $315,000 $639,300 0 0 35,000 0 0
Executive Officer 1996 $275,000 $775,500 0 0 90,000 0 0
John F. Brocci,.................. 1998 $149,777 $130,700 0 0 25,000 0 0
Vice President 1997 $125,525 $205,700 0 0 25,000 0 0
Administration & 1996 $118,750 $255,400 0 0 70,000 0 0
Secretary
</TABLE>
- ---------------
Column (A): Stephen K. Clough resigned June 1998.
Lawrence J. Cawley served as interim Chief Executive Officer from
June -- September 1998.
Brian P. Campbell became Chief Executive Officer in September 1998.
Column (C): Includes deferrals into the 401(k) plan.
Column (D): Kaydon bonuses are based upon prior year's performance (i.e.,
earned) and are paid the following year. For presentation in this
table the bonus earned is shown as paid in the same year.
Column (G): Reflects the number of Non-qualified Stock Options granted. Kaydon
does not have a Stock Appreciation Rights (SAR) Plan.
Column (I): *Represents Stephen K. Clough's severance compensation agreement.
See page 9 for further explanation.
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 named 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 originally entered into Change-in-Control Compensation
Agreements with certain selected executives in October 1995. In September, 1998,
Kaydon entered into modified Change-in-Control Agreements with the three
Executive Officers (Messrs. Campbell, Cawley and Brocci) and other certain
selected executives. 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.
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<PAGE> 9
The termination benefits to which the Executive Officer is entitled, which
coordinate with benefits provided upon a Change-in-Control under the SERP,
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.
REPORT OF THE KAYDON CORPORATION COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors is composed of Messrs.
Breen and Sullivan, both of whom are 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 Kaydon's 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 Kaydon Corporation 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 13 because Kaydon
competes for talent with a broader group of employers than just those in
its industry. For example, of the 90 employers participating in the Middle
Market Survey, only two 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
7
<PAGE> 10
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 business unit; and
- incentive compensation that effectively rewards corporate and
business units 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 business 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 Compensation
Committee may add to, or delete from, the formula generated pool by up to
25% or $750,000, whichever is greater, at their discretion, based upon
their subjective evaluation of non-EPS performance factors. 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 non-employee
Directors of the Board. In 1998, Kaydon's EPS improved 16.7% (diluted).
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 for both corporate and business unit
participants 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.
8
<PAGE> 11
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 stock option grant
recommendations each year. In September, 1998 the Committee awarded a total
of 351,550 stock option grants to 97 employees.
- CEO Compensation -- Stephen K. Clough
Mr. Clough's employment with the Company was terminated on June 24, 1998,
and on that date he resigned from the Board of Directors of Kaydon
Corporation. Pursuant to the terms of his Separation Agreement, Mr.
Clough's total payment upon such termination amounted to $1,822,606, which
is comprised of salary continuance, job attainment bonus and stock options
exercised at an agreed upon price per share. In addition, Mr. Clough was
paid an incentive compensation program bonus of $166,625 in February 1999.
- CEO Compensation -- Lawrence J. Cawley
Mr. Cawley is Chairman of the Board. Upon the resignation of Mr. Clough,
Mr. Cawley was appointed by the Board of Directors as interim President
and Chief Executive Officer to serve until a successor was named. Mr.
Cawley served in this capacity from June 1998 to September 1998.
(o)Base Salary
Mr. Cawley's base salary, which had not changed since October 1995, was
increased 18.8% in consideration of his additional duties, impact to
the continuity and leadership of the Company and the extended top
management transition that would be necessary. No particular weight was
attached to any single factor and the final determination was based
upon the Compensation Committee's subjective judgment regarding the
circumstances and requirements of the Company and Mr. Cawley's overall
contribution to the Company's performance.
(o)Incentive Compensation
Mr. Cawley's incentive compensation is determined in the manner
described above. Upon the assumption of his additional responsibilities
in June 1998, the Compensation Committee re-established Mr. Cawley's
points (the Compensation Committee had reduced his points for fiscal
years 1997 and 1998) to his prior CEO level and provided this change be
effective for the full year. No particular weight was attached to any
single factor and the final determination was based upon the
Compensation Committee's subjective judgment regarding the
circumstances and requirements of the Company and Mr. Cawley's overall
contribution to the Company's performance.
(o)Stock Options
In 1998 Mr. Cawley was granted options for 50,000 shares of Kaydon
stock based upon the Company's continuing performance, his performance
and overall contributions to the Company, his leadership through the
top management succession, 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 -- Brian P. Campbell
Brian P. Campbell has been the President and Chief Executive Officer of
Kaydon Corporation since September 24, 1998. He has been a member of
Kaydon's Board of Directors since September 1995.
9
<PAGE> 12
(o)Base Salary
The Compensation Committee subjectively established Mr. Campbell's base
pay on the basis of its evaluation of his prior experience,
achievements, time in a comparable position and overall contributions
to and the performance of his prior company. The Committee attached no
particular weight to any single factor.
(o)Incentive Compensation
Mr. Campbell received no incentive compensation for fiscal year 1998.
In 1999 Mr. Campbell's incentive compensation will be determined in the
manner described above based upon the number of points he is awarded
and the dollar amount produced by the program's formula. However, based
upon the subjective judgment of the Compensation Committee, it did
establish a minimum bonus for 1999 for Mr. Campbell as part of his
terms of employment.
(o)Stock Options
Mr. Campbell was granted options for 100,000 shares of Kaydon stock in
September, 1998 as part of his terms of employment. The Compensation
Committee subjectively determined the grant was consistent with its
objectives to weight Mr. Campbell's total compensation towards the long
term performance improvement of the company.
- 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 $1 million in a given year.
The Committee will continue to consider ways to maximize deductibility of
executive compensation, while retaining the discretion the Compensation
Committee deems necessary to compensate executive officers in a manner
commensurate with the performance of Kaydon and the competitive
environment for executive talent. In particular, the Kaydon Corporation
1993 Stock Option Plan was amended in a manner which the Company believes
will continue to allow options granted under the Plan to qualify for the
Code's provision for performance-based compensation.
COMPENSATION COMMITTEE:
Gerald J. Breen (Chairman)
Thomas C. Sullivan
10
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer, Director or member of the Compensation Committee of
the Company had any interlocking relationship which would require disclosure in
this Proxy Statement.
OPTION/SAR GRANTS TABLE
SEPTEMBER 1998 GRANT
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF ALTERNATIVE TO
STOCK PRICE (F) AND (G):
APPRECIATION FOR GRANT DATE
INDIVIDUAL GRANTS OPTION TERM VALUE
- ----------------------------------------------------------------------------- ----------------- --------------
(A) (B) (C) (D) (E) (F) (G) (H)
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($) VALUE($)
---- ------------ ------------ ----------- ---------- ------ ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brian P. Campbell 100,000 28% 24.8125 09/23/2003 -- -- $7.45
Lawrence J. Cawley 50,000 14% 24.8125 09/23/2003 -- -- $7.45
John F. Brocci 25,000 7% 24.8125 09/23/2003 -- -- $7.45
</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 $.40 per share which is the annualized dividend paid
to shareholders on the date of the grant.
(d) The risk-free rate of return is the average monthly U.S. Treasury note
with a maturity date corresponding to the option term (i.e., 5 years).
(e) No adjustments for non-transferability or risk of forfeiture.
(2) The material terms of the option are as follows: 25% of the option is
exercisable one year from the date of the grant and an additional 25% is
exercisable each of the following three years. The right to purchase is
cumulative. Exercisability may be accelerated upon death, disability,
retirement, certain mergers or other corporate events, or a change in
control of Kaydon. The option price may be paid in stock or cash.
(3) Column (B) and (C) -- Kaydon does not have a Stock Appreciation Rights (SAR)
Plan.
(4) (a) Mr. Campbell received an option grant of 100,000 shares in September,
1998.
(b) Mr. Cawley received an option grant of 50,000 shares in September, 1998.
(c) Mr. Brocci received an option grant of 25,000 shares in September, 1998.
11
<PAGE> 14
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION/SAR VALUE
- -------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Brian P. Campbell......................... 10,000 61,300 (E) 0 (E) 0
(U) 100,000 (U) 1,524,750
Lawrence J. Cawley........................ 60,000 1,526,250 (E) 91,250 (E) 2,022,335
(U) 123,750 (U) 2,029,300
Stephen K. Clough......................... 81,250 1,615,723 (E) 0 (E) 0
(U) 0 (U) 0
John F. Brocci............................ 12,500 333,590 (E) 43,750 (E) 819,030
(U) 78,750 (U) 1,218,163
</TABLE>
- ---------------
Note: Kaydon stock closed at $40.06 on December 31, 1998.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE BASED PLANS
-------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNTIL MATURA- THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) TION OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
- ---- ------------- -------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Brian P. Campbell......................... 0 0 0 0 0
Lawrence J. Cawley........................ 0 0 0 0 0
John F. Brocci............................ 0 0 0 0 0
</TABLE>
12
<PAGE> 15
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1993 - 1998) TABLE
COMPARISON TABLE
<TABLE>
<CAPTION>
MEASUREMENT PERIOD KAYDON STANDARD &
(FISCAL YEAR COVERED) CORP POORS 500 MACHINERY
<S> <C> <C> <C>
1993 $100.00 $100.00 $100.00
1994 $117.74 $101.60 $100.60
1995 $151.35 $139.71 $142.55
1996 $237.63 $172.18 $181.32
1997 $332.70 $229.65 $277.66
1998 $412.91 $294.87 $237.19
</TABLE>
- Assumes $100 invested at the close of trading in December, 1993
in Kaydon Corporation common stock, Standard & Poors 500 and
Machinery group.
- Total Return Assumes Reinvestment of Dividends.
- Based Upon Fiscal Year Ending December 31, 1998.
- Value Line Machinery Index, published by Value Line, Inc.
13
<PAGE> 16
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 YEARS OF CREDITED SERVICE AT RETIREMENT
AVERAGE -----------------------------------------------------------------
PAY 5 10 15 20 25 30 OR MORE
------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000......................... $ 6,997 $ 13,995 $ 20,992 $ 27,989 $ 34,986 $ 41,984
$ 200,000......................... 14,897 29,795 44,692 59,589 74,486 89,384
$ 300,000......................... 22,797 45,595 68,392 91,189 113,986 136,784
$ 400,000......................... 30,697 61,395 92,092 122,789 153,486 184,184
$ 500,000......................... 38,597 77,195 115,792 154,389 192,986 231,584
$ 600,000......................... 46,497 92,995 139,492 185,989 232,486 278,984
$ 700,000......................... 54,397 108,795 163,192 217,589 271,986 326,384
$ 800,000......................... 62,297 124,595 186,892 249,189 311,486 373,784
$ 900,000......................... 70,197 140,395 210,592 280,789 350,986 421,184
$1,000,000......................... 78,097 156,195 234,292 312,389 390,486 468,584
$1,100,000......................... 85,997 171,995 257,992 343,989 429,986 515,984
$1,200,000......................... 93,897 187,795 281,692 375,589 469,486 563,384
</TABLE>
The Table combines benefits paid under the Kaydon Corporation Retirement
Plan (the "Retirement Plan") and the Kaydon Corporation Supplemental Executive
Retirement Plan (the "SERP").
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 base 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.
Final Average Compensation is the average compensation for the three
highest consecutive calendar years during the ten most recent calendar years.
Remuneration covered in a particular year includes (1) that year's salary (base
pay), and (2) compensation received in that year under the Management Incentive
Compensation Plan.
Federal regulations require that no more than $160,000 in compensation be
considered for the calculation of retirement benefits from the Retirement Plan,
the Company's qualified defined benefit plan, in 1998. The maximum amount paid
from a qualified defined benefit plan cannot exceed $130,000 per year as of
January 1, 1998. The Company previously adopted the SERP to address these
limitations.
The SERP is a non-qualified 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. In general, the SERP provides retirement, early retirement, disability
and death benefits based on the benefit formula contained in the Retirement Plan
applied to all compensation, reduced by benefits actually provided under the
Retirement Plan. In certain cases, additional service credit for purposes of the
SERP benefit formula is provided.
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
Retirement Plan and the SERP 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).
For each of the following officers of Kaydon, the credited Years of Service
under the Retirement Plan and the SERP, as of December 31, 1998, and the
remuneration received during 1998 covered by the Plans were, respectively, as
follows: Mr. Cawley, 13 years plus 13 additional years of credit under the SERP
and
14
<PAGE> 17
$1,160,727; Mr. Campbell, 0 years plus 10 future service years and $166,154; and
Mr. Brocci, 10 years plus 10 additional years of credit under the SERP and
$357,015.
BOARD OF DIRECTORS PROPOSAL TO APPROVE
THE KAYDON CORPORATION 1999 LONG TERM STOCK INCENTIVE PLAN
The Board of Directors has adopted and is presenting for stockholder
approval the Kaydon Corporation 1999 Long Term Stock Incentive Plan (the "1999
Plan"). The 1999 Plan is designed to encourage selected employees of, and
Consultants to, Kaydon Corporation (the "Company") and its subsidiaries to
acquire a proprietary interest in the Company's growth and performance in order
to provide an increased incentive for such individuals to contribute to the
Company's future success and prosperity. The Board believes the 1999 Plan will
enhance the ability of the Company and its subsidiaries to attract and retain
highly qualified individuals upon whom the Company's sustained progress, growth
and profitability depend, thus enhancing the value of the Company for the
benefit of its stockholders. The following summary is qualified in its entirety
by reference to the full text of the 1999 Plan attached to this Proxy Statement
as Annex A.
The Company's 1993 Stock Option Plan (the "Old Plan") has an aggregate of
approximately 570,000 shares remaining available for awards. See "Compensation
of Executive Officers" for information on options granted to certain of the
Company's executive officers under the Old Plan. The Board of Directors believes
that the Old Plan should be replaced with the more flexible 1999 Plan, and that
the institution of the 1999 Plan, which makes additional shares available for
future awards and options, is now advisable. Accordingly, the Board of Directors
has adopted the 1999 Plan and recommends approval by the stockholders. The 1999
Plan authorizes the granting of awards from the date of its approval by
stockholders until the shares authorized for issuance thereunder have been
exhausted. After the 1999 Plan is approved by stockholders, no further awards
will be made under the Old Plan.
GENERAL INFORMATION
The 1999 Plan provides for greater flexibility to the Company than the Old
Plan by permitting, among other things, additional types of awards and greater
latitude as to the terms and conditions of awards, by allowing any awards to be
granted either alone or in combination with or substitution for other awards and
by increasing the number of shares available for awards. Employees of, and
consultants to, the Company and its subsidiaries are eligible to receive awards
under the 1999 Plan. A subsidiary is defined in the 1999 Plan as any entity in
which the Company has a 50% or greater equity interest and any other entity in
which the Committee administering the 1999 Plan determines the Company has a
significant equity interest.
The 1999 Plan permits granting awards for: (i) stock options, including
incentive stock options ("ISOs") meeting the requirements of Section 422 of the
Code and restoration options described below, (ii) stock appreciation rights
("SARs"), (iii) restricted stock and restricted stock units, (iv) performance
awards, (v) dividend equivalents, and (vi) other awards valued in whole or in
part by reference to or otherwise based on Company Common Stock ("other
stock-based awards"). The 1999 Plan will be administered by a Committee composed
of at least two of the Company's Directors, each of whom must be a "non-employee
director" as such term is defined in Rule 16b-3 ("Rule 16b-3") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Committee
will have the authority to establish rules for the administration of the 1999
Plan; to select the employees and consultants (as defined in the 1999 Plan) to
whom awards are granted; to determine the types of awards to be granted and the
number of shares covered by such awards; to set the terms and conditions of such
awards; and to cancel, suspend and amend awards. The Committee may also
determine whether the payment of any proceeds of any award shall or may be
deferred and may authorize payments representing dividends or interest or their
equivalents in connection with any deferred award. Determinations and
interpretations of the Committee will be binding on all parties. Because awards
under the 1999 Plan are made at the discretion of the Committee, benefits to be
received by the participants for 1999 and the benefits that would have been
received by the participants for 1998 cannot be determined or quantified at this
time. The Board may amend, alter or discontinue the 1999 Plan at any time. No
amendment may impair the rights of any outstanding award holder without such
holder's consent.
15
<PAGE> 18
Awards may be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. Awards may provide that upon
their exercise or vesting the holder will receive cash, stock, other securities,
other awards, other property or any combination thereof, as the Committee shall
determine. No participant may receive stock options in any three calendar years
that relate to more than 500,000 shares of Company Common Stock. Any shares of
stock deliverable under the 1999 Plan may consist in whole or in part of
authorized and unissued shares or treasury shares. Subject to certain limited
exceptions and the authority of the committee to determine otherwise, awards
under the 1999 Plan may not be transferred. The 1999 Plan provides that
immediately upon certain events constituting a change in control of the Company
the vesting of all rights of participants accelerates and all restrictions on
awards terminate.
The Committee establishes the purchase price per share for options, the
term of options, the time at which they may be exercised and such other terms as
the committee deems appropriate. Unless the Committee determines otherwise,
payment of the purchase price in full in cash is required upon option exercise,
and options may be exercised for only a limited period of time following
termination of the employment or consulting relationship (up to one year in the
event of death). If the exercise price of an option granted under the 1999 Plan
or of any other option is paid in Company Common Stock, the Committee may grant
the exercising optionee a restoration option covering a number of shares equal
to the number of shares delivered upon such exercise. The closing price of
Company Common Stock on March 5, 1999, was $30.75 per share.
The holder of an SAR will be entitled to receive the excess of the fair
market value (calculated as of the exercise date or, if the committee shall so
determine in the case of any SAR not related to an ISO, as of any time during a
specified period before or after the exercise date) of a specified number of
shares over the grant price of the SAR.
A restricted stock award may provide the recipient with all of the rights
of a stockholder of the Company, including the right to vote the shares and to
receive any dividends. Restricted stock and restricted stock units generally
will be subject to certain forfeiture conditions and may not be transferred by
the recipient until such restrictions lapse. In general, unless the committee
determines otherwise all shares of restricted stock are forfeited upon
termination of the employment or consulting relationship during the restricted
period, except that if termination is due to death or permanent and total
disability all restrictions lapse immediately and if termination of employment
is due to retirement the restrictions continue to lapse in the same manner as
though employment had not terminated.
Performance awards will provide the holder thereof rights valued as
determined by the Committee and payable to, or exercisable by, such holder, in
whole or in part, upon the achievement of such performance goals during such
performance periods as the committee shall establish. Dividend equivalents will
entitle the holder thereof to receive payments equivalent to dividends or
interest with respect to a specified number of shares. The committee is also
authorized to establish the terms and conditions of other stock-based awards.
There are 2,000,000 shares of Company Common Stock initially available for
issuance under the 1999 Plan. In addition, if the Company acquires shares of
Company Common Stock as full or partial payment for the exercise of any option
granted or acquires shares in connection with the 1999 Plan or any other
employee stock option or restricted stock issued by the Company, in open-market
transactions or otherwise, up to 2,000,000 of such shares may be included in the
number of shares available for awards under the 1999 Plan. If any shares subject
to an award under the 1999 Plan are forfeited or if any such award terminates,
the shares previously covered by such award are considered as acquired shares
and may be available for future awards under the 1999 Plan, subject to the
foregoing limitation.
If another company is acquired by the Company or an affiliate in the
future, any awards made and any of the Company's shares delivered upon the
assumption of or in substitution for outstanding grants made by the acquired
company may be deemed to be granted under the 1999 Plan but would not decrease
the number of shares available for grant under the 1999 Plan, except with
respect to individuals subject to Section 16 of the
16
<PAGE> 19
Exchange Act. Except for such awards and except to avoid double counting with
respect to certain awards granted in tandem with or in substitution for other
awards granted under the 1999 Plan, all awards granted will be counted against
the overall limits on the number of shares available pursuant to procedures to
be specified by the Committee.
If any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of shares or other securities of the
Company, issuance of warrants or other rights to purchase shares or other
securities of the Company, or other similar corporate transaction or event
affects the shares, then the Committee may in such manner as it deems equitable,
adjust (1) the number and type of shares (or other securities or property) which
thereafter may be made the subject of awards, (2) outstanding awards, including
without limitation the number and type of shares (or other securities or
property) subject thereto, and (3) the grant, purchase or exercise price with
respect to any award, and may make provision for a cash payment to the holder of
an outstanding award. The Committee will also be authorized, for similar
purposes, to make adjustments in performance award criteria or in the terms and
conditions of other awards in recognition of unusual or nonrecurring events
affecting the Company or its financial statements or of changes in applicable
laws, regulations or accounting principles.
The Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the 1999 Plan or in any award in the manner and to the extent
it shall deem desirable to carry the 1999 Plan into effect. Nothing contained in
the 1999 Plan shall prevent the Company or any affiliate from adopting or
continuing in effect other or additional compensation arrangements.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principle federal income tax consequences
generally applicable to awards under the 1999 Plan. The grant of a stock option
or SAR will generally create no immediate tax consequences for the recipient, or
the Company or an affiliate employing such individual. The holder of an ISO
generally will have no taxable income upon exercising the ISO (except that the
alternate minimum tax may apply), and the employer generally will receive no tax
deduction when an ISO is exercised. Upon exercising a stock option other than an
ISO, the optionee must recognize ordinary income equal to the excess of the fair
market value of the shares acquired on the date of exercise over the option
exercise price, and the employer will then be entitled to a tax deduction for
the same amount. Upon exercising an SAR, the amount of any cash received and the
fair market value on the exercise date of any shares or other property received
are taxable to the recipient as ordinary income and that amount is also
deductible by the employer.
The tax consequence to an optionee of a disposition of shares acquired
through the exercise of an SAR or a stock option will depend on how long the
shares have been held and upon whether such shares were acquired by exercising
an ISO or by exercising as SAR or stock option other than an ISO. Generally,
there will be no tax consequence to the employer in connection with a
disposition of shares acquired under an option except that the employer may be
entitled to a tax deduction in the case of a disposition of shares acquired
under an ISO before the applicable ISO holding periods have been satisfied.
With respect to other awards granted under the 1999 Plan that are settled
either in cash or in shares or other property that is either transferable or not
subject to substantial risk of forfeiture, the holder of such an award must
recognize ordinary income equal to the excess of (a) the cash or the fair market
value of the shares or other property received (determined as of the first time
the shares or other property become transferable or not subject to substantial
risk of forfeiture, whichever occurs earlier) over (b) the amount (if any) paid
for such shares or other property by the participant and the employer will then
be entitled to a deduction for the same amount.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE KAYDON CORPORATION
1999 LONG TERM STOCK INCENTIVE PLAN.
17
<PAGE> 20
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, 1998. 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.
PROPOSALS BY HOLDERS OF COMMON STOCK
Any proposal which a shareholder of Kaydon desires to have included in the
proxy relating to the 2000 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, 1999. The Corporate offices of Kaydon are
located at 19345 U.S. 19 North, Suite 500, Clearwater, Florida 33764-3148. It is
anticipated the corporate offices will be relocated to 315 East Eisenhower
Parkway, Suite 300, Ann Arbor, Michigan 48108, by June 1, 1999.
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 18, 1999
PLEASE SIGN, DATE AND IMMEDIATELY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ADDRESSED ENVELOPE.
18
<PAGE> 21
ANNEX A
KAYDON CORPORATION
1999 LONG TERM STOCK INCENTIVE PLAN
SECTION 1. PURPOSES
The purposes of the 1999 Long Term Stock Incentive Plan (the "Plan") are to
encourage selected employees of, and Consultants to, Kaydon Corporation (the
"Company") and its Subsidiaries to acquire a proprietary interest in the Company
in order to create an increased incentive to contribute to the Company's future
success and prosperity, and enhance the ability of the Company and its
Subsidiaries to attract and retain highly qualified individuals upon whom the
sustained progress, growth and profitability of the Company depend, thus
enhancing the value of the Company for the benefit of its stockholders.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Dividend
Equivalent or Other Stock-Based Award granted under the Plan.
(b) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(d) "Committee" shall mean the Compensation Committee of the Company,
each of the members of which is a "non-employee director" within the
meaning of Rule 16b-3.
(e) "Consultant" shall mean any individual performing bona fide
services for the Company (other than services in connection with the offer
or sale of securities in a capital-raising transaction) including former
and prospective employees of the Company and any other individuals
designated as such by the Committee.
(f) "Dividend Equivalent" shall mean any right granted under Section
6(e) of the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Stock Option" shall mean an Option granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code, or any successor provision thereto.
(i) "Non-Qualified Stock Option" shall mean an Option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(k) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.
(l) "Participant" shall mean an employee of, or Consultant to, the
Company or any Subsidiary designated to be granted an Award under the Plan.
(m) "Performance Award" shall mean any right granted under Section
6(d) of the Plan.
(n) "Permanent and Total Disability" shall mean that the Participant
(i) is unable to perform the essential functions of his or her job for more
than one-hundred eighty (180) days, and (ii) is eligible for, and has
started to receive, social security disability benefits. The determination
of the Participant's satisfaction of (i) and (ii) in the preceding sentence
shall be made at the sole discretion of the Committee.
(o) "Restricted Period" shall mean the period of time during which
Awards of Restricted Stock or Restricted Stock Units are subject to
restrictions.
A-1
<PAGE> 22
(p) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan.
(q) "Restricted Stock Unit" shall mean any right granted under Section
6(c) of the Plan that is denominated in Shares.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act, or any successor rule or
regulation.
(s) "Section 16" shall mean Section 16 of the Exchange Act, the rules
and regulations promulgated by the Securities and Exchange Commission
thereunder, or any successor provision, rule or regulation.
(t) "Shares" shall mean the Company's common stock, par value $.10 per
share, and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(c) of the Plan.
(u) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
(v) "Subsidiary" shall mean any entity in which the Company has a
fifty percent (50%) or greater equity interest and any other entity in
which the Committee determines the Company has a significant equity
interest.
SECTION 3. ADMINISTRATION
The Committee shall administer the Plan, and subject to the terms of the
Plan and applicable law, the Committee's authority shall include without
limitation the power to:
(a) designate Participants;
(b) determine the types of Awards to be granted;
(c) determine the number of Shares to be covered by Awards and any
payments, rights or other matters to be calculated in connection therewith;
(d) determine the terms and conditions of Awards and amend the terms
and conditions of outstanding Awards;
(e) determine how, whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or
suspended; provided, however, that the Committee shall not accept the
tender of Shares that have been held by the Participant for less than six
months;
(f) determine how, whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property
and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(g) determine the methods or procedures for establishing the fair
market value of any property (including, without limitation, any Shares or
other securities) transferred, exchanged, given or received with respect to
the Plan or any Award;
(h) prescribe and amend the forms of Award Agreements and other
instruments required under or advisable with respect to the Plan;
(i) designate Options granted to key employees of the Company or its
Subsidiaries as Incentive Stock Options;
(j) interpret and administer the Plan, Award Agreements, Awards and
any contract, document, instrument or agreement relating thereto;
(k) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the administration of
the Plan;
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(l) decide all questions and settle all controversies and disputes
which may arise in connection with the Plan, Award Agreements and Awards;
(m) make any other determination and take any other action that the
Committee deems necessary or desirable for the interpretation, application
and administration of the Plan, Award Agreements and Awards.
All designations, determinations, interpretations and other decisions under or
with respect to the Plan, Award Agreements or any Award shall be within the sole
discretion of the Committee, may be made at any time and shall be final,
conclusive and binding upon all persons, including the Company, Subsidiaries,
Participants, beneficiaries of Awards and stockholders of the Company.
SECTION 4. SHARES AVAILABLE FOR AWARDS
(a) Shares Available. Subject to adjustment as provided in Section
4(c):
(i) Initial Authorization. There shall be 2,000,000 Shares
initially available for issuance under the Plan.
(ii) Acquired Shares. In addition to the amount set forth above,
up to 2,000,000 Shares acquired by the Company subsequent to the
effectiveness of the Plan as full or partial payment for the exercise
price for an Option or any other stock option granted by the Company, or
acquired by the Company, in open market transactions or otherwise, in
connection with the Plan or any Award hereunder or any other employee
stock option or restricted stock issued by the Company may thereafter be
included in the Shares available for Awards. If any Shares covered by an
Award or to which an Award relates are forfeited, or if an Award
expires, terminates or is canceled, then the Shares covered by such
Award, or to which such Award relates, or the number of Shares otherwise
counted against the aggregate number of Shares available under the Plan
by reason of such Award, to the extent of any such forfeiture,
expiration, termination or cancellation, may thereafter be available for
further granting of Awards and included as acquired Shares for purposes
of the preceding sentence.
(iii) Accounting for Awards. For purposes of this Section 4,
(A) if an Award (other than a Dividend Equivalent) is denominated
in Shares, the number of Shares covered by such Award, or to which such
Award relates, shall be counted on the date of grant of such Award
against the aggregate number of Shares available for granting Awards
under the Plan to the extent determinable on such date and insofar as
the number of Shares is not then determinable under procedures adopted
by the Committee consistent with the purposes of the Plan; and
(B) Dividend Equivalents and Awards not denominated in Shares shall
be counted against the aggregate number of Shares available for granting
Awards under the Plan in such amount and at such time as the Committee
shall determine under procedures adopted by the Committee consistent
with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether
granted simultaneously with or at a different time from), or that are
substituted for, other Awards or restricted stock awards or stock
options granted under any other plan of the Company may be counted or
not counted under procedures adopted by the Committee in order to avoid
double counting. Any Shares that are delivered by the Company or its
Subsidiaries, and any Awards that are granted by, or become obligations
of, the Company, through the assumption by the Company of, or in
substitution for, outstanding restricted stock awards or stock options
previously granted by an acquired company shall not, except in the case
of Awards granted to Participants who are directors or officers of the
Company for purposes of Section 16, be counted against the Shares
available for granting Awards under the Plan.
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(iv) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of
authorized but unissued Shares or of Shares reacquired by the Company,
including but not limited to Shares purchased on the open market.
(b) Individual Stock-Based Awards. Subject to adjustment as provided
in Section 4(c), no Participant may receive stock-based Awards under the
Plan during any three consecutive calendar years that relate to more than
500,000 Shares. No provision of this Paragraph 4(b) shall be construed as
limiting the amount of any cash-based Award which may be granted to any
Participant.
(c) Adjustments. Upon the occurrence of any dividend or other
distribution (whether in the form of cash, Shares, other securities or
other property), change in the capital or shares of capital stock,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, issuance of warrants or other
rights to purchase Shares or other securities of the Company or
extraordinary transaction or event which affects the Shares, then the
Committee shall have the authority to make such adjustment, if any, in such
manner as it deems appropriate, in (i) the number and type of Shares (or
other securities or property) which thereafter may be made the subject of
Awards, (ii) outstanding Awards including without limitation the number and
type of Shares (or other securities or property) subject thereto, and (iii)
the grant, purchase or exercise price with respect to outstanding Awards
and, if deemed appropriate, make provision for cash payments to the holders
of outstanding Awards; provided, however, that the number of Shares subject
to any Award denominated in Shares shall always be a whole number.
SECTION 5. ELIGIBILITY
Any employee of, or Consultant to, the Company or any Subsidiary, including
any officer of the Company (who may also be a director, but excluding a member
of the Committee, any person who serves only as a director of the Company and
any Consultant to the Company or a Subsidiary who is also a director of the
Company and who is not rendering services pursuant to a written agreement with
the entity in question), as may be selected from time to time by the Committee
or by the directors to whom authority may be delegated pursuant to Section 3
hereof in its or their discretion, is eligible to be designated a Participant.
SECTION 6. AWARDS
(a) Options. The Committee is authorized to grant Options to
Participants.
(i) Committee Determinations. Subject to the terms of the Plan,
the Committee shall determine:
(A) the purchase price per Share under each Option;
(B) the term of each Option; and
(C) the time or times at which an Option may be exercised, in
whole or in part, the method or methods by which and the form or
forms (including, without limitation, cash, Shares, other Awards or
other property, or any combination thereof, having a fair market
value on the exercise date equal to the relevant exercise price) in
which payment of the exercise price with respect thereto may be made
or deemed to have been made. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision
thereto, and any regulations promulgated thereunder.
Subject to the terms of the Plan, the Committee may impose such conditions
or restrictions on any Option as it deems appropriate.
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(ii) Other Terms. Unless otherwise determined by the Committee:
(A) A Participant electing to exercise an Option shall give
written notice to the Company, as may be specified by the Committee,
of exercise of the Option and the number of Shares elected for
exercise, such notice to be accompanied by such instruments or
documents as may be required by the Committee, and shall tender the
purchase price of the Shares elected for exercise.
(B) At the time of exercise of an Option payment in full in cash
shall be made for all Shares then being purchased. At the discretion
of the Committee, as set forth in a Participant's Award Agreement,
any Option granted under the Plan may be deemed exercised by delivery
to the Company of a properly executed exercise notice, acceptable to
the Committee, together with irrevocable instructions to the
Participant's broker to deliver to the Company sufficient cash to pay
the exercise price and any applicable income and employment
withholding taxes, in accordance with a written agreement between the
Company and the brokerage firm.
(C) The Company shall not be obligated to issue any Shares
unless and until:
(1) if the class of Shares at the time is listed upon any
stock exchange, the Shares to be issued have been listed, or
authorized to be added to the list upon official notice of
issuance, upon such exchange, and
(2) in the opinion of the Company's counsel there has been
compliance with applicable law in connection with the issuance
and delivery of Shares and such issuance shall have been approved
by the Company's counsel.
Without limiting the generality of the foregoing, the Company may
require from the Participant such investment representation or such
agreement, if any, as the Company's counsel may consider necessary in
order to comply with the Securities Act of 1933 as then in effect,
and may require that the Participant agree that any sale of the
Shares will be made only in such manner as shall be in accordance
with law and that the Participant will notify the Company of any
intent to make any disposition of the Shares whether by sale, gift or
otherwise. The Participant shall take any action reasonably requested
by the Company in such connection. A Participant shall have the
rights of a stockholder only as and when Shares have been actually
issued to the Participant pursuant to the Plan.
(D) If the employment of, or consulting arrangement with, a
Participant terminates for any reason (including termination by
reason of the fact that an entity is no longer a Subsidiary) other
than the Participant's death, the Participant may thereafter exercise
the Option as provided below, except that the Committee may terminate
the unexercised portion of the Option concurrently with or at any
time following termination of the employment or consulting
arrangement (including termination of employment upon a change of
status from employee to Consultant) if it shall determine that the
Participant has engaged in any activity detrimental to the interests
of the Company or a Subsidiary. If such termination is voluntary on
the part of the Participant, the option may be exercised only within
ten days after the date of termination. If such termination is
involuntary on the part of the Participant, if an employee retires or
if the employment or consulting relationship is terminated by reason
of Permanent and Total Disability, the Option may be exercised within
three months after the date of termination or retirement; provided,
however, that at the Committee's discretion, Options held by a
retiree of the Company may continue to vest in accordance with the
Option vesting schedule in effect prior to such Participant's
retirement (however any Incentive Stock Option would automatically
convert to a Non-Qualified Option after the three-month period after
retirement). For purposes of this Paragraph (D), a Participant's
employment or consulting arrangement shall not be considered
terminated (i) in the case of approved sick leave or other bona fide
leave of absence (not to exceed one year), (ii) in the case of a
transfer of employment or the consulting
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arrangement among the Company and Subsidiaries, or (iii) by virtue of
a change of status from employee to Consultant or from Consultant to
employee, except as provided above.
(E) If a Participant dies at a time when entitled to exercise an
Option, then at any time or times within one year after death such
Option may be exercised, as to all or any of the Shares which the
Participant was entitled to purchase immediately prior to death. The
Company may decline to deliver Shares to a designated beneficiary
until it receives indemnity against claims of third parties
satisfactory to the Company. Except as so exercised such Option shall
expire at the end of such period.
(F) An Option may be exercised only if and to the extent such
Option was exercisable at the date of termination of employment or
the consulting arrangement, and an Option may not be exercised at a
time when the Option would not have been exercisable had the
employment or consulting arrangement continued.
(iii) Restoration Options. The Committee may grant a Participant
the right to receive a restoration Option with respect to an Option or
any other option granted by the Company. Unless the Committee shall
otherwise determine, a restoration Option shall provide that the
underlying option must be exercised while the Participant is an employee
of or Consultant to the Company or a Subsidiary and the number of Shares
which are subject to a restoration Option shall not exceed the number of
whole Shares exchanged in payment of the original option.
(b) Stock Appreciation Rights. The Committee is authorized to grant
Stock Appreciation Rights to Participants. Subject to the terms of the
Plan, a Stock Appreciation Right granted under the Plan shall confer on the
holder thereof a right to receive, upon exercise thereof, the excess of (i)
the fair market value of one Share on the date of exercise or, if the
Committee shall so determine in the case of any such right other than one
related to any Incentive Stock Option, at any time during a specified
period before or after the date of exercise over (ii) the grant price of
the right as specified by the Committee. Subject to the terms of the Plan,
the Committee shall determine the grant price, term, methods of exercise
and settlement and any other terms and conditions of any Stock Appreciation
Right and may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units.
(i) Issuance. The Committee is authorized to grant to Participants
Awards of Restricted Stock, which shall consist of Shares, and
Restricted Stock Units which shall give the Participant the right to
receive cash, other securities, other Awards or other property, in each
case subject to the termination of the Restricted Period determined by
the Committee.
(ii) Restrictions. The Restricted Period may differ among
Participants and may have different expiration dates with respect to
portions of Shares covered by the same Award. Subject to the terms of
the Plan, Awards of Restricted Stock and Restricted Stock Units shall
have such restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the
right to receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time or
times, in installments or otherwise. Unless the Committee shall
otherwise determine, any Shares or other securities distributed with
respect to Restricted Stock or which a Participant is otherwise entitled
to receive by reason of such Shares shall be subject to the restrictions
contained in the applicable Award Agreement. Subject to the
aforementioned restrictions and the provisions of the Plan, Participants
shall have all of the rights of a stockholder with respect to Shares of
Restricted Stock.
(iii) Registration. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of
stock certificates.
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(iv) Forfeiture. Except as otherwise determined by the Committee:
(A) If the employment of, or consulting arrangement with, a
Participant terminates for any reason (including termination by
reason of the fact that any entity is no longer a Subsidiary), other
than the Participant's death or Permanent and Total Disability or, in
the case of an employee, retirement, all Shares of Restricted Stock
theretofore awarded to the Participant which are still subject to
restrictions shall upon such termination of employment or the
consulting relationship be forfeited and transferred back to the
Company. Notwithstanding the foregoing or Paragraph (C) below, if a
Participant continues to hold an Award of Restricted Stock following
termination of the employment or consulting arrangement (including
retirement and termination of employment upon a change of status from
employee to Consultant), the Shares of Restricted Stock which remain
subject to restrictions shall nonetheless be forfeited and
transferred back to the Company if the Committee at any time
thereafter determines that the Participant has engaged in any
activity detrimental to the interests of the Company or a Subsidiary.
For purposes of this Paragraph (A), a Participant's employment or
consulting arrangement shall not be considered terminated (i) in the
case of approved sick leave or other bona fide leave of absence (not
to exceed one year), (ii) in the case of a transfer of employment or
the consulting arrangement among the Company and Subsidiaries, or
(iii) by virtue of a change of status from employee to Consultant or
from Consultant to employee, except as provided above.
(B) If a Participant ceases to be employed or retained by the
Company or a Subsidiary by reason of death or Permanent and Total
Disability or if following retirement a Participant continues to have
rights under an Award of Restricted Stock and thereafter dies, the
restrictions contained in the Award shall lapse with respect to such
Restricted Stock.
(C) If an employee ceases to be employed by the Company or a
Subsidiary by reason of retirement, the restrictions contained in the
Award of Restricted Stock shall continue to lapse in the same manner
as though employment had not terminated.
(D) At the expiration of the Restricted Period as to Shares
covered by an Award of Restricted Stock, the Company shall deliver
the Shares as to which the Restricted Period has expired, as follows:
(1) if an assignment to a trust has been made in accordance
with Section 6(g)(iv)(B)(1)(c), to such trust; or
(2) if the Restricted Period has expired by reason of death
and a beneficiary has been designated in a form approved by the
Company, to the beneficiary so designated; or
(3) in all other cases, to the Participant or the legal
representative of the Participant's estate.
(d) Performance Awards. The Committee is authorized to grant
Performance Awards to Participants. Subject to the terms of the Plan, a
Performance Award granted under the Plan (i) may be denominated or payable
in cash, Shares (including, without limitation, Restricted Stock), other
securities, other Awards, or other property, and (ii) shall confer on the
holder thereof rights valued as determined by the Committee and payable to,
or exercisable by, the holder of the Performance Award, in whole or in
part, upon the achievement of such performance goals during such
performance periods as the Committee shall establish. Subject to the terms
of the Plan, the performance goals to be achieved during any performance
period, the length of any performance period, the amount of any Performance
Award granted, the amount of any payment or transfer to be made pursuant to
any Performance Award and other terms and conditions shall be determined by
the Committee.
(e) Dividend Equivalents. The Committee is authorized to grant to
Participants Awards under which the holders thereof shall be entitled to
receive payments equivalent to dividends or interest with respect to a
number of Shares determined by the Committee, and the Committee may provide
that such
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amounts (if any) shall be deemed to have been reinvested in additional
Shares or otherwise reinvested. Subject to the terms of the Plan, such
Awards may have such terms and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is authorized to grant to
Participants such other Awards that are denominated or payable in, valued
in whole or in part by reference to or otherwise based on or related to
Shares (including, without limitation, securities convertible into Shares),
as are deemed by the Committee to be consistent with the purposes of the
Plan, provided, however, that such grants to persons who are subject to
Section 16 must comply with the provisions of Rule 16b-3. Subject to the
terms of the Plan, the Committee shall determine the terms and conditions
of such Awards. Shares or other securities delivered pursuant to a purchase
right granted under this Section 6(f) shall be purchased for such
consideration, which may be paid by such method or methods and in such form
or forms, including, without limitation, cash, Shares, other securities,
other Awards or other property or any combination thereof, as the Committee
shall determine.
(g) General.
(i) No Cash Consideration for Awards. Awards may be granted for no
cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in
the discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award
granted under any other plan of the Company or any Subsidiary. Awards
granted in addition to or in tandem with other Awards or in addition to
or in tandem with awards granted under another plan of the Company or
any Subsidiary, may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or a Subsidiary upon the grant, exercise, or payment
of an Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other
securities, other Awards, or other property, or any combination thereof,
and may be made in a single payment or transfer, in installments, or on
a deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents in respect of installment or deferred
payments.
(iv) Limits on Transfer of Awards.
(A) Except as the Committee may otherwise determine, no Award or
right under any Award may be sold, encumbered, pledged, alienated,
attached, assigned or transferred in any manner and any attempt to do
any of the foregoing shall be void and unenforceable against the
Company.
(B) Notwithstanding the provisions of Paragraph (A) above:
(1) Except as set forth in Paragraph (2) below, a
Participant may assign or transfer a Non-Qualified Stock Option
or rights under an Award of Restricted Stock or Restricted Stock
Units:
(a) to a beneficiary designated by the Participant in
writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by the
Participant for the sole benefit of the Participant during
the Participant's life, and under the terms of which the
Participant is and remains the sole trustee until death or
physical or mental
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incapacity. Such assignment shall be effected by a written
instrument in form and content satisfactory to the Committee,
and the Participant shall deliver to the Committee a true
copy of the agreement or other document evidencing such
trust. If in the judgment of the Committee the trust to which
a Participant may attempt to assign rights under such an
Award does not meet the criteria of a trust to which an
assignment is permitted by the terms hereof, or if after
assignment, because of amendment, by force of law or any
other reason such trust no longer meets such criteria, such
attempted assignment shall be void and may be disregarded by
the Committee and the Company and all rights to any such
Awards shall revert to and remain solely in the Participant.
Notwithstanding a qualified assignment, the Participant, and
not the trust to which rights under such an Award may be
assigned, for the purpose of determining compensation arising
by reason of the Award, shall continue to be considered an
employee or Consultant, as the case may be, of the Company or
a Subsidiary, but such trust and the Participant shall be
bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of and
delivered to such trust shall be conclusively considered
issuance and delivery to the Participant.
(2) The Committee shall not permit directors or officers of
the Company for purposes of Section 16 to transfer or assign
Awards except as permitted under Rule 16b-3.
(C) The Committee, the Company and its officers, agents and
employees may rely upon any beneficiary designation, assignment or
other instrument of transfer, copies of trust agreements and any
other documents delivered to them by or on behalf of the Participant
which they believe genuine and any action taken by them in reliance
thereon shall be conclusive and binding upon the Participant, the
personal representatives of the Participant's estate and all persons
asserting a claim based on an Award. The delivery by a Participant of
a beneficiary designation, or an assignment of rights under an Award
as permitted hereunder, shall constitute the Participant's
irrevocable undertaking to hold the Committee, the Company and its
officers, agents and employees harmless against claims, including any
cost or expense incurred in defending against claims, of any person
(including the Participant) which may be asserted or alleged to be
based on an Award, subject to a beneficiary designation or an
assignment. In addition, the Company may decline to deliver Shares to
a beneficiary until it receives indemnity against claims of third
parties satisfactory to the Company.
(v) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other
securities are then listed and any applicable Federal or state
securities laws, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions.
(vi) Change in Control.
(A) Notwithstanding any of the provisions of this Plan or
instruments evidencing Awards granted hereunder, upon a Change in
Control (as hereinafter defined) the vesting of all rights of
Participants under outstanding Awards shall be accelerated and all
restrictions thereon shall terminate in order that Participants may
fully realize the benefits thereunder. Such acceleration shall
include, without limitation, the immediate exercisability in full of
all Options and the termination of restrictions on Restricted Stock
and Restricted Stock Units. Further, in addition to the Committee's
authority set forth in Section 4(c), the Committee, as constituted
before such Change in Control, is authorized, and has sole
discretion, as to any Award, either at the time such Award is made
hereunder or any time thereafter, to take any one or more of the
following actions: (i) provide for the purchase of any such Award,
upon the Participant's
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request, for an amount of cash equal to the amount that could have
been attained upon the exercise of such Award or realization of the
Participant's rights had such Award been currently exercisable or
payable; (ii) make such adjustment to any such Award then outstanding
as the Committee deems appropriate to reflect such Change in Control;
and (iii) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving
corporation after such Change in Control.
(B) A Change in Control shall occur if:
(1) any "person" or "group of persons" as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act, other than
pursuant to a transaction or agreement previously approved by the
Board of Directors of the Company, directly or indirectly
purchases or otherwise becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) or has the right to acquire
such beneficial ownership (whether or not such right is
exercisable immediately, with the passage of time, or subject to
any condition) of voting securities representing 25 percent or
more of the combined voting power of all outstanding voting
securities of the Company; or
(2) during any period of twenty-four consecutive calendar
months, the individuals who at the beginning of such period
constitute the Company's Board of Directors, and any new
directors whose election by such Board or nomination for election
by stockholders was approved by a vote of at least two-thirds of
the members of such Board who were either directors on such Board
at the beginning of the period or whose election or nomination
for election as directors was previously so approved, for any
reason cease to constitute at least a majority of the members
thereof.
(vii) Cash Settlement. Notwithstanding any provision of this Plan
or of any Award Agreement to the contrary, any Award outstanding
hereunder may at any time be canceled in the Committee's sole discretion
upon payment of the value of such Award to the holder thereof in cash or
in another Award hereunder, such value to be determined by the Committee
in its sole discretion.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend the Plan and the Board of Directors or the Committee may amend any
outstanding Award; provided, however, that without the consent of affected
Participants, no amendment of the Plan or of any Award may impair the
rights of Participants under outstanding Awards.
(b) Waivers. The Committee may waive any conditions or rights under
any Award theretofore granted, prospectively or retroactively, without the
consent of any Participant.
(c) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(c) hereof) affecting the
Company, any Subsidiary, or the financial statements of the Company or any
Subsidiary, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits to be made available under the Plan.
(d) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to effectuate the Plan.
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SECTION 8. GENERAL PROVISIONS
(a) No Rights to Awards. No Participant or other person shall have
any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Participants or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards
of the same type and the determination of the Committee to grant a waiver
or modification of any Award and the terms and conditions thereof need not
be the same with respect to each Participant.
(b) Withholding. The Company or any Subsidiary shall be authorized to
withhold from any Award granted or any payment due or transfer made under
any Award or under the Plan the amount (in cash, Shares, other securities,
other Awards or other property) of withholding taxes due in respect of an
Award, its exercise or any payment or transfer under such Award or under
the Plan and to take such other action as may be necessary in the opinion
of the Company or Subsidiary to satisfy all obligations for the payment of
such taxes. In no event shall the Company or any Subsidiary withhold from
an Award under the Plan more Shares than are required to meet the
established minimum tax withholding requirements of federal, state and
local obligations.
(c) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Subsidiary from adopting or
continuing in effect other or additional compensation arrangements,
including the grant of options and other stock-based awards, and such
arrangements may be either generally applicable or applicable only in
specific cases.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of
the Company or any Subsidiary. Further, the Company or a Subsidiary may at
any time dismiss a Participant from employment, free from any liability, or
any claim under the Plan, unless otherwise expressly provided in the Plan
or in any Award Agreement or other written agreement with the Participant.
(e) Governing Law. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable Federal
law.
(f) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any person or Award, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to applicable laws, or if
it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the intent of the Plan or the Award,
such provision shall be stricken as to such jurisdiction, person or Award,
and the remainder of the Plan and any such Award shall remain in full force
and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Subsidiary and a
Participant or any other person. To the extent that any person acquires a
right to receive payments from the Company or any Subsidiary pursuant to an
Award, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Subsidiary.
(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid
or transferred in lieu of any fractional Shares, or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.
(i) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of the date of its approval by the Company's
stockholders.
A-11
<PAGE> 32
PROXY KAYDON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, APRIL 30, 1999
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 30, 1999 at 10:00 AM, Eastern time, and at any adjournment
thereof.
Gerald J. Breen, Brian P. Campbell, Lawrence J. Cawley, Thomas C. Sullivan
and B. Joseph White have been nominated for election as Directors. Your vote for
the five directors may be indicated below.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO CONTRARY SPECIFICATION IS INDICATED, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2. TO ENSURE THIS PROXY IS PROPERLY
EXECUTED, EACH STOCKHOLDER SHOULD REVIEW THE PROXY STATEMENT SECTION ENTITLED
QUORUM AND VOTE REQUIREMENTS, PAGE 3, BEFORE MARKING THIS CARD. PLEASE MARK BOX
O OR [SHADE IN 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> <C> <C> <C>
[ ] FOR all nominees (except as [ ] AUTHORITY WITHHELD for all. [ ] AUTHORITY WITHHELD for the following only
listed to the contrary). (write each nominee's name in the space
below).
</TABLE>
- --------------------------------------------------------------------------------
Name(s)
(Continued and to be signed on the reverse side)
2. Proposal to approve the Kaydon Corporation 1999 Long Term Stock Incentive
Plan:
[ ] 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: 1999
------------------,
--------------------------------
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.
