UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED
June 30, 2001.
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
--------------- --------------.
Commission File No. 0-1093
KAMAN CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-0613548
- -------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1332 Blue Hills Avenue
Bloomfield, Connecticut 06002
----------------------------------------
(Address of principal executive offices)
(860) 243-7100
--------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of July 31, 2001:
Class A Common 21,773,621
Class B Common 667,814
Page 1 of 19 Pages
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets(In thousands)
Assets June 30, 2001 December 31, 2000
------ ------------------ ------------------
Current assets:
Cash and cash equivalents $ 39,057 $ 48,157
Accounts receivable (net of
allowance for doubtful
accounts of $4,296 in
2001, $4,636 in 2000) 186,331 212,374
Inventories:
Contracts and other
work in process 61,215 65,918
Finished goods 41,944 41,590
Merchandise for resale 87,509 190,668 88,640 196,148
------- -------
Other current assets 36,525 25,321
-------- -------
Total current assets 452,581 482,000
Property, plant & equip., at cost 169,585 170,895
Less accumulated depreciation
and amortization 109,856 107,190
------- -------
Net property, plant & equipment 59,729 63,705
Other assets 8,044 8,125
-------- --------
$520,354 $553,830
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 3,892 $ 3,720
Accounts payable 44,164 58,057
Accrued liabilities 28,520 30,300
Advances on contracts 35,704 41,905
Other current liabilities 35,524 35,244
Income taxes payable - 4,116
-------- -------
Total current liabilities 147,804 173,342
Deferred credits 24,798 23,556
Long-term debt, excl. current portion 23,226 24,886
Shareholders' equity 324,526 332,046
-------- --------
$520,354 $553,830
======== ========
- 2 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
2001 2000 2001 2000
---- ---- ---- ----
Revenues $194,641 $259,852 $439,333 $523,377
Costs and expenses:
Cost of sales 167,865 196,128 350,557 394,880
Selling, general and
administrative expense 47,272 49,439 96,319 100,834
Interest (income)/expense, net 18 (564) (8) (914)
Other (income)/expense, net (2,044) 418 (2,531) 725
-------- -------- -------- --------
213,111 245,421 444,337 495,525
-------- -------- -------- --------
Earnings (loss) before
income taxes (18,470) 14,431 (5,004) 27,852
Income taxes (benefit) (5,975) 5,160 (1,250) 10,025
-------- -------- -------- --------
Net earnings (loss) $(12,495) $ 9,271 $ (3,754) $ 17,827
======== ======== ======== ========
Net earnings (loss) per share:
Basic $ (.56) $ .40 $ (.17) $ .77
Diluted* $ (.56) $ .39 $ (.17) $ .75
======== ======== ======== ========
Dividends declared per share $ .11 $ .11 $ .22 $ .22
======== ======== ======== ========
*The calculated diluted per share amounts for 2001 are anti-dilutive,
therefore, amounts shown are equal to the basic per share calculation.
- 3 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the Six Months
Ended June 30,
--------------------
2001 2000
--------- --------
Cash flows from operating activities:
Net earnings (loss) $ (3,754) $ 17,827
Depreciation and amortization 5,654 5,777
Net gain on sale of assets (2,640) -
Accounts receivable 26,043 (42,472)
Inventory 5,480 6,809
Accounts payable (13,893) 11,789
Advances on contracts (6,201) (4,697)
Income taxes payable (4,116) (115)
Changes in other current assets and liabilities (11,614) (2,865)
Other, net 585 1,566
-------- --------
Cash provided by (used in) operating
activities (4,456) (6,381)
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets 4,038 41
Expenditures for property, plant & equipment (2,991) (3,779)
Other, net (44) (262)
-------- --------
Cash provided by (used in) investing
activities 1,003 (4,000)
-------- --------
Cash flows from financing activities:
Additions (reductions) to notes payable 172 (391)
Reductions to long-term debt (1,660) (1,660)
Purchase of treasury stock - (833)
Dividends paid (4,906) (5,089)
Proceeds from sale of stock 747 769
-------- --------
Cash provided by (used in) financing
activities (5,647) (7,204)
-------- --------
Net increase (decrease) in cash and cash equivalents (9,100) (17,585)
Cash and cash equivalents at beginning of period 48,157 76,249
-------- --------
Cash and cash equivalents at end of period $ 39,057 $ 58,664
======== ========
- 4 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Basis of Presentation
- ----------------------
The December 31, 2000 condensed consolidated balance sheet
amounts have been derived from the previously audited
consolidated balance sheet of Kaman Corporation and subsidiaries.
In the opinion of management, the balance of the condensed
financial information reflects all adjustments which are
necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods
presented and are of a normal recurring nature, unless otherwise
disclosed in this report.
The statements should be read in conjunction with the notes to
the consolidated financial statements included in Kaman
Corporation's 2000 Annual Report.
Gain From The Sale Of Facilities
- --------------------------------
Included in "Other (income)/expense, net" for 2001 are the gains
from the sale of facilities of $2,002 for the second quarter and
$2,679 for the six-month period.
Cash Flow Items
- ---------------
Cash payments for interest were $1,135 and $1,220 for the six
months ended June 30, 2001 and 2000, respectively. Cash payments
for income taxes for the comparable periods were $13,281 and
$9,945, respectively.
Comprehensive Income (Loss)
- ---------------------------
Comprehensive income (loss) was $(3,794) and $17,754 for the
six months ended June 30, 2001 and 2000, respectively.
Comprehensive income (loss) was $(12,398) and $9,204 for the
three months ended June 30, 2001 and 2000, respectively. The
changes to net earnings (loss) used to determine comprehensive
income (loss) are foreign currency translation adjustments.
- 5 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Shareholders' Equity
- --------------------
Changes in shareholders' equity were as follows:
Balance, January 1, 2001 $332,046
Net earnings (loss) (3,754)
Foreign currency translation adjustment (40)
--------
Comprehensive income (loss) (3,794)
Dividends declared (4,922)
Employee stock plans 1,196
--------
Balance, June 30, 2001 $324,526
========
Recent Accounting Standards
- ---------------------------
In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141"), and No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"), which are effective July 1, 2001 and January 1, 2002,
respectively, for the corporation. SFAS 141 requires all business
combinations initiated after June 30, 2001 to use the purchase method
of accounting. SFAS 142 will discontinue the amortization of goodwill,
including goodwill recorded in past business combinations, upon adoption
of this standard. All goodwill and intangible assets will be evaluated
on an ongoing basis for impairment in accordance with the provisions of
the Statement. Based upon the corporation's initial assessment of these
Statements, adoption is not anticipated to have a material impact on the
corporation's financial position or results of operations.
- 6 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 1. Financial Statements, Continued:
Notes to Condensed Consolidated Financial Statements
(In thousands)
Business Segments
- -----------------
Summarized financial information by business segment is as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- --------------------
2001 2000 2001 2000
--------- --------- --------- --------
Net sales:
Aerospace $ 54,554 $ 98,893 $146,712 $195,350
Industrial Distribution 113,033 133,176 236,104 269,539
Music Distribution 26,751 27,541 56,011 57,925
-------- -------- -------- --------
$194,338 $259,610 $438,827 $522,814
======== ======== ======== ========
Operating profit (loss):
Aerospace $(20,929) $ 11,390 $(10,740) $ 22,191
Industrial Distribution 3,582 6,135 8,660 11,645
Music Distribution 563 500 1,882 2,029
-------- -------- -------- --------
(16,784) 18,025 (198) 35,865
Interest, corporate and
other expense, net (1,686) (3,594) (4,806) (8,013)
-------- -------- -------- --------
Earnings (loss) before
income taxes $(18,470) $ 14,431 $ (5,004) $ 27,852
======== ======== ======== ========
June 30, December 31,
2001 2000
-------- --------
Identifiable assets:
Aerospace $287,386 $307,762
Industrial Distribution 128,313 137,297
Music Distribution 53,616 53,444
Corporate 51,039 55,327
-------- --------
$520,354 $553,830
======== ========
- 7 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
In the quarter ended June 30, 2001, the corporation recorded a
sales and pre-tax earnings adjustment of $31.2 million,
substantially all of which is associated with a change in estimated
costs to complete the SH-2G (A) helicopter program for Australia.
The cost growth for that program is related to a contract dispute
settlement with subcontractor Litton Guidance and Control Systems
(now part of Northrop Grumman) regarding its development of an
advanced Integrated Tactical Avionics System (ITAS) that is unique
to this particular contract. The corporation is currently placing
the balance of the ITAS software development work with other
subcontractors, which is a principal element of the cost growth.
As a result, consolidated revenues for the quarter and six months
ended June 30, 2001 were $194.6 million and $439.3 million (both
reduced by the $31.2 million adjustment) respectively, compared
to $259.9 million and $523.4 million for the comparable periods
of 2000.
Aerospace segment net sales were $54.6 million and $146.7 million
(both reduced by the adjustment)for the second quarter and six
months period of 2001, respectively, compared to $98.9 million
and $195.4 million in the same periods of last year. The
Aerospace segment's principal programs include helicopter
manufacturing, aircraft structures subcontract work and
manufacture of components such as self-lubricating bearings and
driveline couplings for aircraft applications, and advanced
technology products.
The corporation's helicopter programs include the SH-2G multi-
mission naval helicopter and the K-MAX (registered trademark)
medium-to-heavy lift helicopter. Helicopter programs represented
approximately 21 percent (without the adjustment it would be
approximately 50%) of segment net sales for the second quarter of
2001, compared to approximately 60 percent for 2000. The lower
percentage for the second quarter is due to the adjustment along
with some anticipated tapering off in revenues from the SH-2G
program as the Australia and New Zealand programs mature.
The SH-2G helicopter program (which constitutes substantially all
of the segment's total helicopter program sales in the second
quarter) generally involves retrofit of the corporation's SH-2F
helicopters, previously manufactured for the U.S. Navy (and in
storage) to the SH-2G configuration. The corporation is
currently performing this work under commercial contracts with
the governments of Australia and New Zealand.
- 8 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The program for New Zealand involves five (5) aircraft and
support for the Royal New Zealand Navy. The contract has an
anticipated value of about $185 million (US), of which 90 percent
has now been recorded as revenue. Two aircraft were shipped
during the second quarter and two aircraft are scheduled for
shipment during the third quarter, with each aircraft subject to
final acceptance by the Royal New Zealand Navy. Delivery of the
fifth aircraft (which represents the exercise of an option for
additional aircraft) is planned for next year.
The program for Australia involves eleven (11) helicopters with
support, including a support services facility, for the Royal
Australian Navy. The total contract has an anticipated value of
about $680 million (US). The helicopter production portion of the
work is valued at $559 million, of which 80 percent (including
the effect of the adjustment) has been recorded as revenue.
Due to the need to retain other subcontractors to complete ITAS
development, delivery of the full ITAS to Australia will be
delayed. The corporation is working with the Royal Australian
Navy to develop satisfactory procedures for approval of the new
software subcontractor arrangements being made, and thereafter
procedures for interim acceptance of the aircraft without the
full ITAS and coordination of deliveries of the aircraft(one of
which is already in Australia). When fully equipped with ITAS,
the SH-2G (A) will provide the most sophisticated, integrated
cockpit and weapons system available in an intermediate-weight
helicopter.
The corporation believes that international market opportunities
for the SH-2G are good, even though the market is highly
competitive and influenced by political and economic conditions.
The corporation is currently in a competition to provide six
search and rescue helicopters for the government of Egypt. The
SH-2G size is well suited for operating from the types of ships
in service with the Egyptian Navy. In its last procurement for
anti-submarine warfare helicopters, the Republic of Egypt
selected ten SH-2Gs, which have been in service since 1998 and
for which the corporation continues to provide on-site support.
The corporation is also in discussions with the U.S. Navy
regarding refurbishment of four of the U.S. Naval Reserve's
surplus SH-2G helicopters for the Polish navy, along with future
training and support.
The corporation has taken a consignment of the Navy's inventory
of SH-2 spare parts under a multi-year agreement that provides
- 9 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
the corporation the ability to utilize certain inventory for
support of the corporation's other SH-2 programs.
On the K-MAX helicopter program, the corporation continues its
efforts to refocus sales development on global market
opportunities in industry and government, including oil and gas
exploration, power line and other utility construction, fire
fighting, law enforcement, and the movement of equipment.
Net sales for the portion of the Aerospace segment that performs
subcontract work and manufactures aircraft components represented
about 58 percent of sales for the second quarter. Without the
adjustment, it would be approximately 37 percent compared to
approximately 27 percent a year ago. The segment is involved in
a number of commercial and defense aviation programs, including
production of wing structures and other components for virtually
all Boeing commercial aircraft as well as components for the
Boeing C-17 transport and F-22 fighter. Work is progressing on
two multi-year contracts received last year from MD Helicopters,
Inc. to supply fuselages for that company's entire line of
single-engine helicopters and composite rotor blades for its MD
Explorer helicopter. The corporation expects to deliver 43
fuselages to MD Helicopters this year and deliveries of rotor
blades are scheduled to begin in September. These MD Helicopter
contracts have a total potential value of $175 million. The
segment's component manufacturing includes self-lubricating
bearings for use principally in aircraft flight controls, turbine
engines and landing gear, and driveline couplings for
helicopters.
The Aerospace segment also produces advanced technology products,
including missile safe, arm and fuzing devices, precision
measuring systems, mass memory systems, electromagnetic motors,
microwave cabling, and electro-optic devices. Net sales for this
portion of the segment's business represented about 21 percent of
segment sales. Excluding the adjustment, it would be
approximately 13 percent, the same as the second quarter last
year.
Industrial Distribution segment net sales were $113.0 million and
$236.1 million for the second quarter and six months ended June
30, 2001 respectively, compared to $133.2 million and $269.5
million for the same periods of 2000. These results reflect
conditions in the industrial sector of the U.S. economy. Reduced
plant capacity utilization and temporary plant closures have
affected the segment, which primarily serves the maintenance and
repair needs of its customers. The corporation began implementing
programs last year to streamline operations and increase sales
and marketing efforts and these steps have helped the segment to
remain competitive and profitable in a challenging environment.
- 10 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Music Distribution net sales were $26.8 million and $56.0 million
for the quarter and six months ended June 30, 2001 respectively,
compared to $27.5 million and $57.9 million for the same periods
of 2000. Domestic sales continue to be affected by the economic
slowdown and overall softening in the music market.
International sales are also soft due largely to the economic
conditions and currency exchange rate fluctuations in countries
where the segment does business. Management expects that, as it
has been traditionally, the second half of the year will be a
stronger sales period as music retailers increase their buying in
preparation for the holiday season.
As a result of the $31.2 million sales and earnings adjustment,
the corporation's segments, in total, experienced operating
losses of $16.8 million for the quarter and $198 thousand for the
six months ended June 30, 2001, respectively, compared to an
operating profit of $18.0 million and $35.9 million for the same
periods of 2000. Excluding the adjustment, total operating
profit was $14.4 million and $31 million for the quarter and six
month periods of 2001.
For the Aerospace segment, there were operating losses of $20.9
million and $10.7 million for the quarter and six months ended
June 30, 2001, respectively. Excluding the adjustment, operating
profit was $10.3 million for the second quarter and $20.5 million
for the first half of 2001. Operating profit for the Aerospace
segment was $11.4 million and $22.2 million for the second
quarter and first half of 2000. These results are predominantly
due to the sales and pre-tax earnings adjustment recorded in the
second quarter as well as some tapering off of revenue in the SH-
2G helicopter program as the Australia and New Zealand programs
mature.
Operating profit for the Industrial Distribution segment was $3.6
million for the second quarter and $8.7 million for the six
months ended June 30, 2001, compared to $6.1 million and $11.6
million for the same periods of 2000, reflecting the effect of
reduced sales due to adverse economic conditions. Operating
profit for the Music Distribution business was $563 thousand in
the second quarter and $1.9 million for the first half of 2001
compared to $500 thousand and $2.0 million for the same periods
of 2000.
For the quarter and six months ended June 30, 2001, interest
income earned from investment of cash approximated interest
expense.
- 11 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Other income for 2001 include gains from the sale of facilities
of $2.0 million during the second quarter and $2.7 million during
the six month period ended June 30, 2001.
As a result of the $31.2 million sales and earnings adjustment,
the corporation has adjusted its 2001 estimated effective tax
rate to 25.0 percent, primarily due to reduced tax considerations
on the Australia SH-2G program. The consolidated effective income
tax rate for the same period last year was 36.0 percent.
As a result of the adjustment, the corporation experienced net
losses of $12.5 million ($0.56 loss per share diluted) and $3.8
million ($0.17 loss per share diluted) for the second quarter and
six months ended June 30, 2001, respectively, compared to net
earnings of $9.3 million ($0.39 per share diluted) and $17.8
million ($0.75 per share diluted) for the same periods a year
ago. Excluding the $31.2 million earnings adjustment and the
change in the effective tax rate, second quarter net earnings
were $8.3 million ($0.36 per share diluted) and $17.0 million
($0.74 per share diluted) for the three and six months periods of
2001.
In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, "Business
Combinations" (SFAS 141), and No. 142,"Goodwill and Other
Intangible Assets" (SFAS 142), which are effective for the
corporation on July 1, 2001 and January 1, 2002, respectively.
SFAS 141 requires all business combinations initiated after June
30, 2001 to use the purchase method of accounting. SFAS 142
discontinues the amortization of goodwill, including goodwill
recorded in past business combinations, upon adoption of the
standard. All goodwill and intangible assets will be evaluated
on an ongoing basis for impairment in accordance with the
provisions of the Statement. Based upon the corporation's
initial assessment of SFAS 141 and SFAS 142, their adoption is
not anticipated to have a material impact on the corporation's
financial position or results of operations.
Liquidity and Capital Resources
- -------------------------------
On an annual basis, the corporation's cash flow from operations
has generally been sufficient to finance a significant portion of
its working capital and other capital requirements.
- 12 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
During the first half of 2001, operating activities used cash, in
part due to reductions in the Aerospace segment's accounts
payable and advances on contracts. This was offset to some extent
by a decrease in inventories, largely in the Aerospace segment's
K-MAX program. Other items include a decrease in accounts
receivable, which is generally due to the $31.2 million sales and
earnings adjustment and a reduction in income taxes payable and
an increase in other current assets, which relate primarily to
the tax benefits associated with the adjustment.
During the first half of 2001, cash was used in investing
activities for items such as acquisition of machinery and
computer equipment, which use was more than offset by proceeds
from the sale of assets during the quarter. Cash used by
financing activities was primarily attributable to the payment of
dividends to common shareholders and the sinking fund requirement
for the corporation's debentures (described below).
At June 30, 2001, the corporation had $24.9 million of its 6%
convertible subordinated debentures outstanding. The debentures
are convertible into shares of Class A common stock at any time
on or before March 15, 2012 at a conversion price of $23.36 per
share, generally at the option of the holder. Pursuant to a
sinking fund requirement that began March 15, 1997, the
corporation redeems approximately $1.7 million of the outstanding
principal of the debentures each year.
In November 2000, the corporation's board of directors authorized
a replenishment of the corporation's stock repurchase program,
providing for the repurchase of an aggregate of 1.4 million Class
A shares for use in administration of the corporation's stock
plans and general corporate purposes. No shares were repurchased
during the first half of 2001.
The corporation had $39.1 million in cash and cash equivalents at
June 30, 2001, with an average of $39.7 million for the first
half of 2001. These funds have been invested in high quality
short term investments.
The corporation maintains a revolving credit agreement involving
a group of eight financial institutions. The agreement has a
maximum unsecured line of credit of $225 million, which consists
of a $150 million commitment for five (5) years and a $75 million
commitment under a "364 day" arrangement which is renewable
- 13 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
annually for an additional 364 days. The most restrictive of the
covenants contained in the agreement requires the corporation to
have EBITDA, as defined, at least equal to 300% of interest
expense and a ratio of consolidated total indebtedness to total
capitalization of not more than 55%. As of June 30, 2001, there
were no borrowings under this agreement.
Letters of credit are generally considered borrowings for
purposes of the revolving credit agreement. The governments of
Australia and New Zealand made advance payments of $104.3 million
in connection with their SH-2G contracts in 1997 and those
payments were fully secured by the corporation through issuance
of irrevocable letters of credit. The face amount of these
letters of credit remains at $41.2 million. Reductions are
anticipated as certain contract milestones are reached and as the
corporation and the Australian government agree upon a modified
acceptance and delivery schedule for the SH-2G(A)s.
Other average bank borrowings for the six months ended June 30,
2001 were $2.1 million, compared to $2.6 million for the same
period of 2000.
Management believes that the corporation's cash flow from
operations and available unused bank line of credit under its
revolving credit agreement will be sufficient to finance its
working capital and other capital requirements for the
foreseeable future.
Management also believes that its strong balance sheet provides
flexibility for it to identify and pursue appropriate
opportunities to expand its businesses.
Forward-Looking Statements
- --------------------------
This report contains forward-looking information relating to the
corporation's business and prospects, including the SH-2G and
K-MAX helicopter programs, aircraft structures and components,
the industrial and music distribution businesses, earnings
expectations for future periods and other matters that involve a
number of uncertainties that may cause actual results to differ
materially from expectations. Those uncertainties include, but
are not limited to: 1) the successful conclusion of competitions
and thereafter contract negotiations with government authorities,
including foreign governments; 2) political developments in
countries where the corporation intends to do business;
- 14 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
3) standard government contract provisions permitting
renegotiation of terms and termination for the convenience of
the government; 4) economic and competitive conditions in
markets served by the corporation, including industry
consolidation in the United States and global economic
conditions; 5) negotiation of subcontracts for, and timing of
satisfactory completion of, the Australian SH-2G(A) program; 6)
timing, degree and scope of market acceptance for products such
as a repetitive lift helicopter; 7) U.S. industrial production
levels; 8) changes in supplier sales policies; 9) the effect of
price increases or decreases; and 10) currency exchange rates,
taxes, laws and regulations, inflation rates, general business
conditions and other factors. Any forward-looking information
should be considered with these factors in mind.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
The corporation has various market risk exposures that arise
from its normal business operations, including currency exchange
rates, supplier price changes, and interest rates as well as
other factors described in the Forward-Looking Statements
section of this report.
The corporation's exposure to currency exchange rates is managed
at the corporate and subsidiary operations levels as an integral
part of the business.
The corporation's exposure to supplier sales policies and price
changes relates primarily to its distribution businesses and
the corporation seeks to manage this risk through its
procurement policies and maintenance of favorable relationships
with suppliers.
The corporation's exposure to interest rate risk relates
primarily to its financial instruments, which include short-
term investments with market interest rates and debt obligations
with fixed interest rates. Currently the corporation has
limited exposure in this area due to the level of its fixed rate
debt obligation and borrowings under its financing arrangements.
Where it currently exists, interest rate risk is managed through
the use of a combination of fixed rate long-term debt and
variable rate borrowings under its financing arrangements.
Letters of credit for the Australia and New Zealand SH-2G
helicopter contracts are generally considered borrowings for
- 15 -
KAMAN CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Continued
Item 3. Quantitative and Qualitative Disclosures About Market
Risk (continued)
purposes of the corporation's revolving credit agreement; they
are not subject to interest rate risk, however, fees are charged
based upon the corporation's usage and credit rating.
There has been no significant change in the corporation's
exposure to these market risk factors during the second quarter
of 2001. Management believes that any near-term change in the
market risk factors described above should not materially affect
the consolidated financial position, results of operations or
cash flows of the corporation.
- 16 -
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 5. Other Information
Kaman Aerospace Corporation and Joseph H. Lubenstein have
executed an Employment Agreement and a Change in Control
Agreement, both dated July 9, 2001. Mr. Lubenstein became
president of Kaman Aerospace Corporation on that date. These
agreements are attached as Exhibits 10(a) and 10(b) to this
report.
Kaman Corporation and Walter R. Kozlow have executed a letter
agreement dated July 9, 2001 and a Consultant's Agreement dated
July 12, 2001. Mr. Kozlow has been an employee of Kaman
Aerospace Corporation for 41 years and served as president of
Kaman Aerospace Corporation from 1986 to July 9, 2001.
Mr. Kozlow now serves as a Senior Executive Advisor to the
Corporation and will retire at the end of 2001. These agreements
are attached as Exhibits 10(c) and 10(d) to this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to Form 10-Q:
10(a) Employment agreement between Kaman Aerospace
Corporation and Joseph H. Lubenstein, dated
July 9, 2001
10(b) Change In Control Agreement between Kaman
Aerospace Corporation and Joseph H. Lubenstein,
Dated July 9, 2001
10(c) Letter Agreement between Kaman Corporation and
Walter R. Kozlow, dated July 9, 2001
10(d) Consultant's Agreement between Kaman Corporation
and Walter R. Kozlow, dated July 12, 2001
(11) Earnings (loss) per share computation
(b) Report on For 8-K filed in the second quarter
of 2001:
There have been no reports on Form 8-K filed
during the quarter ended June 30, 2001.
- 17 -
KAMAN CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KAMAN CORPORATION
Registrant
Date: August 14, 2001 By: /s/ Paul R. Kuhn
-----------------------------
Paul R. Kuhn
Chairman, President and
Chief Executive Officer
(Duly Authorized Officer)
Date: August 14, 2001 By: /s/ Robert M. Garneau
-----------------------------
Robert M. Garneau
Executive Vice President and
Chief Financial Officer
- 18 -
KAMAN CORPORATION AND SUBSIDIARIES
Index to Exhibits
Exhibit 10(a) Employment agreement between Kaman Attached
Aerospace Corporation and Joseph H.
Lubenstein, dated July 9, 2001
Exhibit 10(b) Change In Control Agreement between Attached
Kaman Aerospace Corporation and Joseph
H. Lubenstein, dated July 9, 2001
Exhibit 10(c) Letter Agreement between Kaman Corporation Attached
And Walter R. Kozlow, dated July 9, 2001
Exhibit 10(d) Consultant's Agreement between Kaman Attached
Corporation and Walter R. Kozlow, dated
July 12, 2001
Exhibit 11 Earnings (Loss) Per Share Computation Attached
- 19 -
EMPLOYMENT AGREEMENT
This Agreement is made as of July 9, 2001 (the "Effective Date") by
and between Joseph H. Lubenstein ("I" , "me", or "my") and Kaman
Aerospace Corporation ("Kaman" or "the Company").
WITNESSETH:
WHEREAS, the Company and I are establishing an employment
relationship; and
WHEREAS, the parties desire to have the terms and conditions of
that relationship definitively described, including in particular
the circumstances under which certain severance payments will be
due and payable and a commitment regarding non-competition
following termination of employment under certain circumstances;
NOW THEREFORE, in consideration of the mutual promises contained in
this Agreement, the Company and I agree as follows:
I. (a) I will abide by all of Kaman's rules and regulations now
or hereafter established and agree that the posting of any such
rules or regulations on the bulletin boards of the various
departments and/or as listed in any employee handbooks will
constitute personal notice thereof to me. I understand that no
statements made in any such publications or elsewhere shall operate
to change the terms and conditions of my employment as described in
this Agreement.
(b) I understand and agree that I may become aware of certain
secret and/or confidential information during the course of my
employment and such information includes, but is not limited to,
that pertaining to methods, processes, designs, equipment,
catalogues, computer disks, customer lists, inventions, sales and
operating procedures. I agree that all tangible confidential
information such as computer disks, reports, customer lists, etc.
are the sole property of Kaman and I agree that upon termination of
employment with Kaman, I will return, on demand, any and all
confidential information in my possession. During and after my
employment, I will disclose to Kaman and will not divulge or
appropriate to my own use or to the use of others, including any
other employer, any such confidential information or knowledge
obtained by me during such employment, whether in tangible or
intangible form, including, but not limited to data, plans,
decisions, methods, processes, designs, equipment, catalogues,
customer lists, inventions, and sales and operating procedures.
(c) Recognizing that, by virtue of my employment, I may learn
information, not generally available, concerning business methods,
customer lists or other trade secrets, I agree that during my
employment I will not, directly or indirectly, become connected
Page 1
with, promote the interest of, or engage in any other business or
activity competing with the business to which my employment relates
within the geographical area in which the business of the Company
is conducted. I further agree that if any court or arbitrator
should find this covenant and agreement against competition not to
be reasonable as to the scope of prohibited activities, then such
portion of this covenant and agreement held to be unreasonable
shall be regarded as severable and stricken from this Agreement,
and such covenant and agreement shall be of full force and effect
for the activities which are determined not to be unreasonable.
(d) I will treat as for Kaman's sole benefit, and fully and
promptly disclose and assign to Kaman without additional
compensation, all ideas, discoveries, inventions and improvements,
patentable or not, which, while I am employed, are made, conceived
or reduced to practice by me, alone or with others, during or after
usual working hours either on or off my job, and which are related
directly or indirectly to Kaman's business or interest or which
result from tasks assigned to me by Kaman.
(e) I agree, at Kaman's expense, at any time during or after
my employment, to sign all papers and do such other acts reasonably
required of me to protect Kaman's rights to said ideas,
discoveries, inventions and improvements, including applying for,
obtaining and enforcing patents on said discoveries, inventions,
improvements in any and all countries.
(f) I represent that there are no agreements, understandings
or legal requirements applicable to me which prohibit the execution
of this Agreement or prohibit or otherwise limit the performance of
my obligations hereunder or my duties as an employee of the Company
nor will the execution of this Agreement and the performance of my
obligations or duties result in a conflict of interest between me
and any other party.
II. I understand that, as an employee of Kaman, I owe a duty of
loyalty to Kaman. As part of this duty of loyalty, I will:
(a) avoid personal investment, interests or associations which
might interfere with the independent exercise of my judgment on
business related matters;
(b) not, directly or through a member of my immediate family
or otherwise, accept any gratuitous payment, loan, service, or
other consideration of value from any party doing or seeking to do
business with Kaman;
(c) fully disclose all facts concerning services that I, or
any other person of whom I have knowledge, may have rendered to any
party competing, dealing, or seeking to deal with Kaman, if it is
required to determine if a conflict of interest exists; and
Page 2
(d) not buy or sell Kaman Corporation stock if I have
information about Kaman Corporation or any of its subsidiaries that
is not already available to the public nor will I tell other people
about any information of that kind. I understand and acknowledge
that Kaman's policies prohibit such behavior and in many cases, it
will be in violation of the securities laws.
III. I understand and agree that my employment with Kaman is an
"at will" relationship and such employment and compensation can be
terminated, with or without cause, and with or without notice, at
any time, at the option of Kaman or me. I understand that this
Agreement can be changed only by a written document signed by me
and an officer of the Company, or his designee, who is also an
officer of Kaman Corporation. No application, brochure, policy
statement, procedure, benefit plan, summary, work rules, employee
handbook, or any other written or oral communication between the
Company and its employees is intended to create an employment
contract. I understand and agree that as a condition of my "at
will" employment, if any disputes arise out of my termination of
employment with the Company that I will first seek to resolve all
such disputes by engaging in good faith discussions with
appropriate managerial personnel of the Company.
IV. (a) Notwithstanding any other provision of this Agreement, it
is understood that, beginning on the Effective Date of this
Agreement and ending on July 8, 2003, if Kaman terminates my
employment for any reason (other than due to my willful refusal to
perform proper responsibilities of my position or a violation of
law on my part) or if I terminate my employment for "good reason",
and the Change in Control Agreement dated September 21, 1999
July 9, 2001
between Kaman and me is not applicable, that
on my last day of employment (the "Termination Date"), the Company
will provide me with:
1) a lump sum cash payment equal to two (2) times my then
current base annual salary rate (which rate cannot be less than the
salary rate for the most recently completed calendar year prior to
the Termination Date or the salary rate in effect as of the
Effective Date, whichever is higher);
2) a lump sum cash payment equal to two (2) times my most
recent cash bonus payment; and the bonus for which I am eligible
due to my employment during the calendar year in which the
Termination Date occurs, with such bonus to be pro rated and
calculated in accordance with the Kaman Corporation Cash Bonus
Plan;
3) with regard to all restricted stock, stock appreciation
rights or stock option awards that I have received, (i) all
restrictions with respect to any restricted stock shall lapse, and
(ii) all stock appreciation rights and stock options shall become
Page 3
fully vested and then canceled in exchange for a cash payment equal
to the excess of the fair market value of the shares of Kaman
Corporation stock subject to the stock appreciation right or stock
option on the Termination Date over the exercise price(s) of such
stock appreciation rights or stock options; and
4) my Company automobile. The book value then attributed to
it by the leasing company will be considered a fringe benefit
income and that amount will be subject to tax during the calendar
year in which the Termination Date occurs.
In addition to the aforementioned items, the Company will
provide me with:
5) reimbursement for COBRA premium payments for applicable
group medical/dental benefits until I accept employment elsewhere,
but in any event for not more than twelve (12) months; and
6) premium payments for one (1) year with regard to the Mass
Mutual group universal life insurance policy issued in my name.
(b) It is understood that I will have "good reason" to
terminate my employment with the Company if any one of the
following acts, or failures to act, by the Company, occurs:
1) I am removed from the officer position held by me at the
Effective Date; or
2) I am assigned any duties or responsibilities inconsistent
with the officer position held by me at the Effective Date or there
is a substantial diminution in the nature or status of my
responsibilities from those existing on the Effective Date; or
3) the Company reduces my annual base salary from that
existing on the Effective Date; or
4) the Company significantly reduces my annual cash bonus from
the "modified target bonus opportunity" figure that is calculated
each year in accordance with the Kaman Corporation Cash Bonus Plan.
(c) My right to terminate my employment for good reason shall
not be affected by my incapacity due to physical or mental illness.
My continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act
constituting good reason under this Agreement.
(d) It is understood that for purposes of any determination
regarding the existence of good reason, any claim by me that good
reason exists shall be presumed to be correct unless the Company
establishes to its Board of Directors by clear and convincing
evidence that good reason does not exist.
Page 4
(e) In the event that the items described in Section IV (a)
are provided to me pursuant to this Agreement, I agree that for a
period of two (2) years following the Termination Date, I will not,
directly or indirectly, become connected with, promote the interest
of, or engage in any other business or activity competing with the
business of the Company within the geographical area in which the
business of the Company is conducted.
(f) Unless required otherwise by law or government regulation,
the parties will maintain the terms and conditions of this
Agreement in confidence.
V. This Agreement supersedes any previous agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which may exist between the
parties, except that both parties acknowledge the validity of that
certain Change in Control Agreement dated July 9, 2001, between the
parties. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
Connecticut. Any payments provided for hereunder shall be paid net
of any applicable withholding required under federal, state or
local law and any additional withholding to which I have agreed.
In Witness Whereof, the parties have executed, or caused this
Agreement to be executed, on his or its behalf.
July 9, 2001
Date Signature of Employee
Joseph H. Lubenstein
Employee's Typed Name
Acknowledged and Agreed this 9th day of
July, 2001.
Kaman Aerospace Corporation
By Robert M. Garneau
Its Vice President
Page 5
Page 7
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, is made as of July 9, 2001, by and between
Kaman Aerospace Corporation, a Delaware corporation (the
"Company"), and Joseph H. Lubenstein (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholder to foster the continued employment of
key management personnel; and
WHEREAS, in furtherance of this objective, the Company and
Executive have executed an Employment Agreement dated as of July 9,
2001; and
WHEREAS, the Board recognizes that the possibility of a Change
in Control exists and that such possibility, which will not be
addressed by the Employment Agreement, and the uncertainty and
questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment
of the Company and its shareholder; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention
and dedication of members of the Company's management, including
the Executive, to their assigned duties without the potential
distractions arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive
hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section of this
Agreement.
2. Term. [Intentionally Omitted]
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in
consideration of the Executive's continued employment, the Company
agrees, under the conditions described herein, to pay the Executive
the Severance Payments and the other payments and benefits
described in this Agreement. Except as provided in Section 8.1 of
this Agreement, no Severance Payments shall be payable under this
Agreement unless there shall have been (or, under the terms of the
second sentence of Section 5.1, there shall be deemed to have been)
Page 1
a termination of the Executive's employment with the Company
following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment
and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be
retained in the employ of the Company.
4. Compensation Other Than Severance Payments.
4.1 If the Executive's employment shall be terminated for any
reason following a Change in Control, the Company shall pay the
Executive's full salary to the Executive through the Date of
Termination at the rate in effect immediately prior to the Date of
Termination or, if Section 15 (o)(II) is applicable as an event or
circumstance constituting Good Reason, the rate in effect
immediately prior to such event or circumstance, together with all
compensation and benefits payable to the Executive through the Date
of Termination under the terms of the Company's compensation and
benefit plans, programs or arrangements as in effect immediately
prior to the Date of Termination (or, if more favorable to the
Executive, as in effect immediately prior to the first occurrence
of an event or circumstance constituting Good Reason), including,
but not limited to, the bonus for which the Executive is eligible
due to his or her employment during the calendar year in which the
Date of Termination occurs, with such bonus to be pro rated and
calculated in accordance with the Kaman Corporation Cash Bonus
Plan.
4.2 If the Executive's employment shall be terminated for any
reason following a Change in Control, the Company shall pay to the
Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, the Company's retirement, insurance and other
compensation or benefit plans, programs and arrangements as in
effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good
Reason.
5. Severance Payments.
5.1 If the Executive's employment is terminated during the
thirty-six (36) month period following a Change in Control, other
than (A) by the Company for Cause, (B) by reason of death or
Disability, or (C) by the Executive without Good Reason, then the
Company shall pay the Executive the amounts, and provide the
Executive the benefits described in this Section 5 ("Severance
Payments") in addition to any payments and benefits to which the
Executive is entitled under Section 4 of this Agreement. For
Page 2
purposes of this Agreement, the Executive's employment shall be
deemed to have been terminated by the Company following a Change in
Control, without Cause or by the Executive with Good Reason, if (i)
the Executive's employment is terminated by the Company without
Cause prior to a Change in Control and such termination was at the
request or direction of a Person who has entered into an agreement
with the Company the consummation of which would constitute a
Change in Control, (ii) the Executive terminates his employment for
Good Reason prior to a Change in Control and the circumstance or
event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason and such termination or the circumstance or event which
constitutes Good Reason is otherwise in connection with or in
anticipation of a Change in Control. For purposes of any
determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be
presumed to be correct unless the Company establishes to the Board
by clear and convincing evidence that such position is not correct.
(a) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination and in lieu of
any severance benefit otherwise payable to the Executive, the
Company shall pay to the Executive a lump sum severance payment, in
cash, equal to the sum of (i) two (2) times the Executive's base
salary as in effect immediately prior to the Date of Termination
or, if Section 15 (o)(II) is applicable as an event or circumstance
constituting Good Reason, the rate in effect immediately prior to
such event or circumstance, and (ii) two (2) times the annual bonus
actually paid for the fiscal year ending immediately prior to the
fiscal year in which occurs the Date of Termination, pursuant to
any annual bonus or incentive plan maintained by or through the
Company.
(b) For the twenty-four (24) month period immediately
following the Date of Termination, the Company shall arrange to
provide the Executive and his dependents medical, dental, and
accidental death and disability benefits substantially similar to
those provided to the Executive and his dependents immediately
prior to the Date of Termination or, if more favorable to the
Executive, those provided to the Executive and his dependents
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, at no greater cost to the
Executive than the cost to the Executive immediately prior to such
date or occurrence. Benefits otherwise receivable by the Executive
pursuant to this Section 5.1(b) shall be reduced to the extent
benefits of the same type are received by or made available to the
Executive during the twenty-four (24) month period following the
Date of Termination (and any such benefits received by or made
Page 3
available to the Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall reimburse the
Executive for the excess, if any, of the cost of such benefits to
the Executive over such cost immediately prior to the Date of
Termination or, if more favorable to the Executive, the first
occurrence of an event or circumstance constituting Good Reason.
(c) Notwithstanding any provision to the contrary in any plan
or agreement maintained by or through the Company pursuant to which
the Executive has been granted restricted stock, stock options or
stock appreciation rights, effective on the Date of Termination,
(i) all restrictions with respect to any restricted stock shall
lapse, and (ii) all stock appreciation rights and stock options
shall become fully vested and then canceled in exchange for a cash
payment equal to the excess of the fair market value of the shares
of Parent Company stock subject to the stock appreciation right or
stock option on the date of the Change in Control, over the
exercise price(s) of such stock appreciation rights or stock
options.
(d) In addition to the retirement benefits to which the
Executive is entitled under any tax-qualified, supplemental or
excess benefit pension plan maintained by or through the Company
and any other plan or agreement entered into between the Executive
and the Company which is designed to provide the Executive
supplemental retirement benefits (the "Pension Plans") or any
successor plan thereto, effective upon the Date of Termination, the
Executive shall receive vesting credit under the Kaman Corporation
Supplemental Employees Retirement Plan ("SERP") equal to two years
of Continuous and Credited Service (as defined in the Kaman
Corporation Employees' Pension Plan to which the SERP is
supplemental).
(e) If the Executive would have become entitled to benefits
under the Company's post-retirement health care plans, as in effect
immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason,
had the Executive's employment terminated at any time during the
period of twenty-four (24) months after the Date of Termination,
the Company shall provide such post-retirement health care benefits
to the Executive and the Executive's dependents commencing on the
later of (i) the date on which such coverage would have first
become available and (ii) the date on which benefits described in
Section 5.1 (b) terminate.
(f) The Company shall (i) either prepay all remaining
premiums, or establish an irrevocable grantor trust holding an
amount of assets sufficient to pay all such remaining premiums
(which trust shall be required to pay such premiums), under any
Page 4
insurance policy maintained by or through the Company insuring the
life of the Executive, that is in effect, and (ii) shall transfer
to the Executive any and all rights and incidents of ownership in
such arrangements at no cost to the Executive.
(g) The Company shall provide the Executive with
reimbursement for outplacement services received by the Executive
for up to Thirty Thousand Dollars ($30,000), but only until the
first acceptance by the Executive of an offer of employment.
(h) The Company shall provide the Executive with his Company
automobile. The book value then attributed to it by the leasing
company will be considered "fringe benefit" income and that amount
will be subject to tax during the calendar year in which the Date
of Termination occurs.
5.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the payments or benefits received or
to be received by the Executive in connection with a Change in
Control or the Executive's termination of employment (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the
Company or such Person) (such payments or benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the "Total
Payments") will be subject to the Excise Tax, the Company shall pay
to the Executive an additional amount (the "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Total Payments shall be treated as
"parachute payments" (within the meaning of Section 280G(b)(2) of
the Code) unless, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to the Executive and selected by the
accounting firm which was, immediately prior to the Change in
Control, the Company's independent auditor (the "Auditor"), such
payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the meaning
of Section 280G(b)(l) of the Code shall be treated as subject to
the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash
Page 5
benefits or any deferred payment or benefit shall be determined by
the Auditor in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income tax at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment
is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if there is no
Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 5.2), net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating
the Gross-Up Payment, the Executive shall repay to the Company,
within thirty (30) days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Executive), to the extent that
such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable income and
wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at
120% of the rate provided in Section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by
the Executive with respect to such excess) within thirty (30) days
following the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
5.3 The Company also shall reimburse the Executive for legal
fees and expenses incurred by the Executive in disputing in good
faith any issue hereunder relating to the termination of the
Executive's employment or in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement. Such
payments shall be made within ten (10) business days after delivery
of the Executive's written request for payment accompanied with
such evidence of fees and expenses incurred as the Company
reasonably may require.
Page 6
5.4 The payments provided in subsections (a) and (c) of
Section 5.1 shall be made on the last day of the Executive's
employment. The payments provided in Section 5.2 of this Agreement
shall be made as soon as practicable following the Date of
Termination, but in no event later than thirty (30) days following
the Date of Termination. If payments are not made in the time
frame required by this subsection, interest on the unpaid amounts
will accrue at 120% of the rate provided in Section 1274(b)(2)(B)
of the Code until the date such payments are actually made. At the
time that payments are made under this Agreement, the Company shall
provide the Executive with a written statement setting forth the
manner in which such payments were calculated and the basis for
such calculations including, without limitation, any opinions or
other advice the Company has received from Tax Counsel, the Auditor
or other advisors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6. Termination Procedures and Compensation During Dispute.
6.1 Notice of Termination. After a Change in Control, any
purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with Section 9 of this Agreement. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Further,
a Notice of Termination for Cause is required to include a copy of
a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that, in
the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
6.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a
Change in Control, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties
during such thirty (30) day period), and (ii) if the Executive's
employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination
Page 7
by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
6.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to this
Section 6.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the
date on which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or
decree of an arbitrator or a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal
therefrom has expired and no appeal has been perfected); provided,
however, that the Date of Termination shall be extended by a notice
of dispute given by the Executive only if such notice is given in
good faith and the Executive pursues the resolution of such dispute
with reasonable diligence.
6.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and the Date of Termination is
extended in accordance with Section 6.3 of this Agreement, the
Company shall continue to pay the Executive the full compensation
in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Executive
as a participant in all compensation, benefit and insurance plans
in which the Executive was participating when the notice giving
rise to the dispute was given, until the Date of Termination, as
determined in accordance with Section 6.3 of this Agreement.
Amounts paid under this Section 6.4 are in addition to all other
amounts due under this Agreement (other than those due under
Section 4.1 of this Agreement) and shall not be offset against or
reduce any other amounts due under this Agreement.
7. No Mitigation. The Company agrees that under this
Agreement, if the Executive's employment with the Company
terminates, the Executive is not required to seek other employment
or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 5 of this Agreement or
Section 6.4 of this Agreement. Further, the amount of any payment
or benefit provided for in this Agreement (other than as
specifically provided in Section 5.1(b) of this Agreement) shall
not be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by the Executive to
the Company, or otherwise.
Page 8
8. Successors; Binding Agreement.
8.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this
Agreement in accordance with its terms. Failure of the Company to
obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that,
for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination.
8.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount
would still be payable to the Executive hereunder (other than
amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive's
estate.
9. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed, if to the Executive, to the
address inserted below the Executive's signature on the final page
hereof and, if to the Company, to the address set forth below, or
to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of
change of address shall be effective only upon actual receipt:
To the Company:
c/o Kaman Corporation
1332 Blue Hills Ave., P.O. Box 1
Bloomfield, CT 06002
Attention: Candace A. Clark, Secretary
Page 9
10. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and
an officer of the Company, or his designee, who is also an officer
of the Parent Company. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of any lack of
compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior
or subsequent time. This Agreement supersedes any other agreements
or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either
party. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of Connecticut.
Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed.
The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after its expiration shall survive any such expiration.
11. Validity; Counterparts. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together
will constitute one and the same instrument.
12. Confidentiality. Unless required otherwise by law or
government regulation, the parties will maintain the terms and
conditions of this Agreement in confidence.
13. Settlement of Disputes. All claims by the Executive for
benefits under this Agreement shall be directed to and determined
by the Board and shall be in writing. Any denial by the Board of a
claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for
the denial and the specific provisions of this Agreement relied
upon. The Board shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall
further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board
that the Executive's claim has been denied.
Page 10
14. Arbitration. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Hartford, Connecticut, in accordance
with the rules of the American Arbitration Association then in
effect; provided, however, that the evidentiary standards set forth
in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the contrary,
the Executive shall be entitled to seek specific performance of the
Executive's right to be paid until the Date of Termination during
the pendency of any dispute or controversy arising under or in
connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(a) "Affiliate" shall have the meaning set forth in Rule 12b-
2 promulgated under Section 12 of the Exchange Act.
(b) "Auditor" shall have the meaning set forth in Section 5.2
of this Agreement.
(c) "Base Amount" shall have the meaning set forth in Section
280G(b)(3) of the Code.
(d) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the
Company (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination
for Good Reason by the Executive pursuant to Section 6.1 of this
Agreement) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties,
or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i)
and (ii) of this definition, (x) no act, or failure to act, on the
Page 11
Executive's part shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was
in the best interest of the Company and (y) in the event of a
dispute concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless the
Company establishes to the Board by clear and convincing evidence
that Cause exists.
(g) The first to occur of any one of the following events
shall constitute the occurrence of a "Change in Control" for
purposes of this Agreement:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of (i) the Parent Company representing
35% or more of the then outstanding securities of the Parent
Company generally entitled to vote in the election of directors of
the Parent Company, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in
clause (i) of paragraph (II) below, or (ii) any Person is or
becomes the Beneficial Owner, directly or indirectly, of securities
of (i) the Company representing 35% or more of the then
outstanding securities of the Company generally entitled to vote in
the election of directors of the Company, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction
described in clause (i) of paragraph (III) below; or
(II) there is consummated a merger or consolidation of the
Parent Company with any other business entity, other than (i) a
merger or consolidation which would result in the securities of the
Parent Company generally entitled to vote in the election of
directors of the Parent Company outstanding immediately prior to
such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into such securities of
the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding such
securities under an employee benefit plan of the Parent Company or
any subsidiary of the Parent Company, at least 65% of the
securities of the Parent Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation and generally entitled to vote in the election of
directors of the Parent Company or such surviving entity or any
parent thereof, or (ii) a merger or consolidation effected to
implement a recapitalization of the Parent Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Parent Company
representing 35% or more of the then outstanding securities of the
Parent Company generally entitled to vote in the election of
directors of the Parent Company; or
Page 12
(III) there is consummated a merger or consolidation of the
Company with any other business entity, other than (i) a merger or
consolidation which would result in the securities of the Company
generally entitled to vote in the election of directors of the
Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into such securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding such securities
under an employee benefit plan of the Company or any Subsidiary of
the Company, at least 65% of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately
after such merger or consolidation and generally entitled to vote
in the election of directors of the Company or such surviving
entity or any parent thereof, or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
35% or more of the then outstanding securities of the Company
generally entitled to vote in the election of directors of the
Company, (iii) any merger or consolidation with another direct or
indirect subsidiary of the Parent Company; or (iv) any merger or
consolidation of the Company with a Subsidiary of the Company;
(IV) the stockholders of the Parent Company approve a plan of
complete liquidation or dissolution of the Parent Company or there
is consummated the sale or disposition by the Parent Company of all
or substantially all of the Parent Company's assets, other than a
sale or disposition by the Parent Company of all or substantially
all of the Parent Company's assets to an entity where the
outstanding securities generally entitled to vote in the election
of directors of the Parent Company immediately prior to the sale
continue to represent (either by remaining outstanding or by being
converted into such securities of the surviving entity or any
parent thereof) 65% or more of the outstanding securities of such
entity generally entitled to vote in the election of directors
immediately after such sale;
(V) the following individuals cease for any reason to
constitute a majority of the number of directors of the board of
directors of the Parent Company then serving: individuals who, on
the date of this Agreement, constitute the board of directors of
the Parent Company and any new director (other than a director
whose initial assumption of office is a result of an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Parent
Company and whose appointment or election was not approved by at
Page 13
least two-thirds (2/3) of the directors of the Parent Company in
office immediately prior to any such contest) whose appointment or
election by the board of directors of the Parent Company or
nomination for election by the Parent Company's stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of
the directors then in office;
(VI) there is consummated the sale or disposition by the
Company of all or substantially all of the Company's assets, other
than a sale or disposition by the Company of all or substantially
all of the Company's assets to an entity, of which at least 65% of
the outstanding securities generally entitled to vote in the
election of directors are owned by the Parent Company or a direct
or indirect subsidiary of the Parent Company.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur in the event of a distribution or spin-off of
shares of the capital stock of the Company to the shareholders of
the Parent Company and this Agreement shall terminate on the date
that such distribution or spin off is effectuated.
Within five (5) days after a Change in Control has occurred,
the Company shall deliver to the Executive a written statement
memorializing the date that the Change in Control occurred.
(h) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(i) "Company" shall mean Kaman Aerospace Corporation and,
except in determining under Section 15(g) hereof whether or not any
Change in Control of the Company has occurred, shall include any
successor to its business and/or assets.
(j) "Date of Termination" shall have the meaning set forth in
Section 6.2 of this Agreement.
(k) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a
result of the Executive's incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time
performance of the Executive's duties with the Company for a period
of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of
the Executive's duties.
Page 14
(l) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(m) "Excise Tax" shall mean any excise tax imposed under
Section 4999 of the Code.
(n) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(o) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the
Executive's express written consent) after any Change in Control,
of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act
described in paragraph (I), (V), (VI), or (VII) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as President of the
Company or a substantial diminution in the nature or status of the
Executive's responsibilities from those in effect immediately prior
to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date of this Agreement or as
the same may be increased from time to time;
(III) the relocation of the Executive's principal place
of employment to a location more than 50 miles from the Executive's
principal place of employment immediately prior to the Change in
Control or the Company's requiring the Executive to be based
anywhere other than such principal place of employment (or
permitted relocation thereof) except for required travel on the
Company's business to an extent substantially consistent with the
Executive's business travel obligations immediately prior to the
Change in Control;
(IV) the failure by the Company to pay to the Executive
any portion of the Executive's current compensation, or to pay to
the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within thirty (30) days of the date such compensation is
due;
Page 15
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation (including, but not limited to, the Kaman
Corporation Compensation Administration Plan, Kaman Corporation
Cash Bonus Plan, and Kaman Corporation 1993 Stock Incentive Plan),
unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or
the failure by the Company to continue the Executive's
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount or timing of payment of benefits provided and the level of
the Executive's participation relative to other participants, as
existed immediately prior to the Change in Control;
(VI) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those enjoyed
by the Executive under any of the Company's life insurance, health
and accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control, the
taking of any other action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed by the Executive
at the time of the Change in Control, or the failure by the Company
to provide the Executive with the number of paid vacation days to
which the Executive is entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control, provided,
however, that this paragraph shall not be construed to require the
Company to provide the Executive with a defined benefit pension
plan if no such plan is provided to similarly situated executive
officers of the Company or its Affiliates; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 6.1 of this
Agreement; for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good Reason
hereunder.
Page 16
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists
shall be presumed to be correct unless the Company establishes to
the Board by clear and convincing evidence that Good Reason does
not exist.
(p) "Gross-Up Payment" shall have the meaning set forth in
Section 5.2 of this Agreement.
(q) "Notice of Termination" shall have the meaning set forth
in Section 6.1 of this Agreement.
(r) "Parent Company" shall mean Kaman Corporation and,
except in determining under Section 15(g) hereof whether or not any
Change in Control of the Parent Company has occurred, shall include
any successor to its business and/or assets.
(s) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include (i) the
Parent Company or the Company or any of their direct or indirect
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, (iv) a corporation owned, directly or indirectly, by
the stockholder of the Company in substantially the same
proportions and with substantially the same voting rights as their
ownership and voting rights with respect to the Company, or (v)
Charles H. Kaman or any entity created or controlled by him,
provided that he possesses and exercises, in person or by proxy
solicited by the board of directors of the Parent Company, the
right to vote all securities of the Parent Company generally
entitled to vote in the election of directors of the Parent
Company, of which he or any such entity is the Beneficial Owner.
(t) "Severance Payments" shall have the meaning set forth in
Section 5.1 of this Agreement.
(u) "Subsidiary" shall mean any corporation of which the
Company owns, directly or indirectly, a majority of securities
entitled to vote in the election of directors.
(v) "Tax Counsel" shall have the meaning set forth in
Section 5.2 of this Agreement.
(x) "Term" shall mean the period of time described in
Section 2 of this Agreement.
Page 17
(y) "Total Payments" shall mean those payments so described
in Section 5.2 of this Agreement.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the date and year first above written.
Kaman Aerospace Corporation
- --------------------- By: ------------------------
Joseph H. Lubenstein Name: Robert M. Garneau
Title: Vice President
Date Date
Address:
108 Millington Road
East Haddam, CT 06423
July 9, 2001
Mr. Walter R. Kozlow
c/o Kaman Corporation
P.O. Box 1
Bloomfield, CT 06002
Dear Walt:
I have already expressed to you my personal thanks for your more
than 41 years of service with the Corporation. Your contributions have
been pivotal to the success of yhe organization. I especially appreciate
your contribution to the successful conclusion of the search for your
successor.
We have previously discussed the Corporation's willingness to provide
you with special consideration for your continued employment beyond your
normal retirement date. Now that Joe Lubenstein will be starting as
president of Aerospace on this date, this is to confirm our agreement
with you that:
1) Beginning today and ending on December 31, 2001 (the "Advisor Period"),
Kaman Corporation ("the Corporation") will retain you in full time employee
status, holding the position of Senior Executive Advisor. During the
Advisor Period, you will receive monthly salary payments at the annual rate
of Three Hundred Twenty Five Thousand Dollars ($325,000), which payments
will be subject to tax and employee benefit withholdings. In this position,
you will continue to be eligible for all of your current employee benefits
as a senior executive Kaman Corporation. You will retire under the
Kaman Corporation Employees' Pension Plan effective January 1, 2002.
2) Beginning January 1, 2002, the Corporation will enter into a consultant's
agreement having a non-cancellable term of two years and providing for a
consultant's fee totaling one year's salary and bonus as follows: Your fee
for each year will be equal to (1) $162,500 (being fifty percent of your
2001 base annual salary rate of $325,000), plus (2) $80,000 (being fifty
percent of your $160,000 bonus for year 2000, which was the higher of the
two most recent cash bonus awards (under the Kaman Corporation Cash Bonus
Plan) paid to you prior to your retirement). The agreement will have such
other terms as will be mutually agreed.
3) The Corporation will cause all of your outstanding stock options and
stock appreciation rights to fully vest and lapse any remaining restrictions
on your outstanding restricted stock awards, effective on December 31, 2001.
Page 1
4) You will return to the Corporation your 2000 Lincoln Town Car and a
2002 Lincoln Town Car will be leased through Wheels for you. Effective
December 31, 2001, the Corporation will give you the 2002 company automobile.
The value then attributed to it by Wheels (i.e., the remaining lease payments)
will be considered "fringe benefit" income to you and that amount will be
subject to tax in 2001.
5) Upon your retirement, the Corporation will continue to make regular
periodic premium payments for life insurance policies issued under the
Senior Executive Life Insurance Program for the remainder of your life
(or, if earlier, when the policy becomes fully paid as a result of regular
periodic premium payments). These premium payments will be considered
"fringe benefit" income to you and that amount will be subject to tax
each year. This commitment shall be considered a contractual obligation
of the Corporation which shall be assumed by any successor in interest
to the Corporation.
6) The Corporation will reimburse you for the cost of preparing your 2001
personal income tax return.
7) We have agreed that you will not receive a bonus or stock incentive
award for the 2001 year.
8) Your Employment Agreement and Change in Control Agreements will end,
if not already expired or terminated, upon your retirement.
If this arrangement is acceptable to you, please sign and date this
letter in the space provided. When fully signed, this letter and the
consultant's agreement will constitute our entire agreement regarding
this matter.
Sincerely,
Paul R. Kuhn
Accepted and Agreed this 17th
day of July, 2001.
Walter R. Kozlow
Page 2
Mr. Walter R. Kozlow
July 9, 2001
Page 4
CONSULTANT'S AGREEMENT
THIS AGREEMENT, effective this 12th day of July, 2001 by
and between Kaman Corporation, a corporation organized and
existing under the laws of the State of Connecticut and having
its office and principal place of business in Bloomfield,
Connecticut (hereinafter called "Kaman"), and Walter R. Kozlow,
of 192 Woodward Road, Brooklyn, CT 06234, Social Security
Number ###-##-#### (hereinafter called "Consultant").
WITNESSETH:
WHEREAS, a portion of Kaman's business relates to aerospace
products and technology; and
WHEREAS, Consultant has special qualifications in the areas
of aerospace management, strategic planning, contracting and
marketing activities, and related disciplines; and
WHEREAS, the parties hereto have agreed to utilize
Consultant's services as Consultant to the President to advise
and consult in connection with Kaman's business in such fields
upon conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the premises, the parties
hereto mutually agree as follows:
1. Services. Consultant shall furnish to Kaman during the
Term services commensurate with his knowledge and experience as
reasonably requested by Kaman. Services will be provided at such
times and locations as shall be mutually agreed between the
parties. All services to be performed under this Agreement will
be specifically requested by Mr. Paul R. Kuhn or his designee.
2. Term. The term of this Agreement shall be for a period
of two (2) years commencing on January 1, 2002 (the "Term").
3. Compensation. a) For his services, the Consultant
shall be paid a fee equal to Twenty Thousand Two Hundred Eight
and 33/100 Dollars ($20,208.33) per month for the first eleven
months of each year during the Term and Twenty Thousand Two
Hundred Eight and 37/100 for the twelfth month of each year
during the Term. Payments shall be made at the end of each
month during the Term. In no event will Consultant engage in,
or will any portion of the Consultant's fees paid hereunder,
be used for any improper or illegal purpose or activity.
Consultant acknowledges receipt of and agrees to comply with
Kaman's Standards of Business Ethics and Conduct as applicable
to all Kaman employees.
Page 1
b) Consultant shall be reimbursed by Kaman for Consultant's
out-of-pocket business expenses incurred in rendering his
services, provided such expenses are directly incident to the
performance of his services under this Agreement and that such
expenses have been approved in advance by Kaman's designated
representative. Such expenses shall include airlines fare,
hotel bills, entertainment expenses, and other reasonable and
proper expenses incurred in performing consulting work for
Kaman. Consultant agrees to provide receipts for said expenses.
c) Consultant shall keep such time records as Kaman may
reasonably require. Kaman shall provide Consultant with Internal
Revenue Service Form 1099 "U.S. Information Return" annually
within the time provided by law for any calendar year coming
within the Term. Consultant agrees that he is obligated to pay
all appropriate federal, state and local income taxes and sales or
other taxes relating to this Agreement and to comply with all
federal, state and local laws regarding same and further agrees
to indemnify and hold Kaman harmless from any and all liability
which may result from Consultant's failure to do so or from
Kaman's not withholding amounts for sales or income tax or FICA.
It is expressly agreed by and between Consultant and Kaman that
the applicable Consultant's fee shall be the total compensation
due Consultant and Consultant is not eligible for any Kaman
benefits including but not limited to insurance programs, workers
compensation benefits, medical benefits, vacation pay and personal
time. It is understood and agreed that Consultant shall maintain
his own insurance coverage, as appropriate, to cover medical,
automobile and general liability (and workers compensation, if
applicable) in generally acceptable amounts and Consultant shall
provide Kaman with certificate or certificates evidencing such
coverage at Kaman's request.
4. Confidentiality. Consultant shall use his best efforts
to perform successfully the tasks assigned to him by Kaman and
shall not, without the prior written consent of Kaman, directly
or indirectly, divulge information concerning or touching upon the
work performed by him for Kaman. It is understood that disclosure
of information relating to work under Government contracts of a
restricted nature to any person not entitled to receive the same,
or failure to safeguard all classified matter which may come to the
knowledge of Consultant in connection with such work, may subject
Consultant to criminal liability under the laws of the United
States.
5. No Conflicts of Interest. Consultant represents that
there are no agreements or understandings between Consultant and
any other person, partnership or corporation which prohibits the
execution of the Agreement or the performance of the obligations
hereunder.
Page 2
6. Termination. (Intentionally Omitted)
7. Independent Contractor. The parties intend and agree
that Consultant is acting and will act as an independent contractor
and not as an employee of Kaman in performance of his services
under this Agreement. During the Term, Consultant shall not in
any manner be engaged in or concerned with any business competitive
with any business related to the consulting activities performed
hereunder.
8. Governing Law; Disputes. This Agreement shall be
interpreted under the laws of the State of Connecticut. Any
controversy or claim arising out of or relating to this Agreement,
or breach hereof shall be settled by arbitration to be held at
Hartford, Connecticut in accordance with the rules of the American
Arbitration Association and judgment upon the award rendered
thereunder by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
9. Entire Agreement; No Assignment. This Agreement
constitutes the entire agreement of the parties and shall be
binding on or inure to the benefit of the parties hereto. It is
understood and agreed that this Agreement is personal to the
Consultant and cannot be assigned or otherwise alienated in any
manner.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement in duplicate the day and year first above written.
KAMAN CORPORATION
Candace A. Clark By Paul R. Kuhn
Witness Its President
Date July 12, 2001 Date July 12, 2001
Candace A. Clark Walter R. Kozlow
Witness Consultant
Date July 17, 2001 Date July 17, 2001
Page 3
Page 5
Page 1
KAMAN CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - EARNINGS (LOSS) PER SHARE COMPUTATION
(In thousands except per share amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
2001 2000 2001 2000
---- ---- ---- ----
Basic:
Net earnings (loss) $(12,495) $ 9,271 $ (3,754) $ 17,827
======== ======== ======== ========
Weighted average number
of shares outstanding 22,377 23,166 22,343 23,146
======== ======== ======== ========
Net earnings (loss) per share $ (.56) $ .40 $ (.17) $ .77
- basic ======== ======== ======== ========
Diluted:
Net earnings (loss) $(12,495) $ 9,271 $ (3,754) $ 17,827
Elimination of interest expense
on 6% subordinated convertible
debentures(net after taxes) 280 255 535 522
-------- -------- -------- --------
Net earnings (loss) (as adjusted)$(12,215) $ 9,526 $ (3,219) $ 18,349
======== ======== ======== ========
Weighted average number of
shares outstanding 22,377 23,166 22,343 23,146
Weighted average shares issuable on
conversion of 6% subordinated
convertible debentures 1,066 1,136 1,094 1,165
Weighted average shares issuable on
exercise of diluted stock options 267 26 257 31
-------- -------- -------- -------
Total 23,710 24,328 23,694 24,342
======== ======== ======== =======
Net earnings (loss) per share
- diluted* $ (.56) $ .39 $ (.17) $ .75
======== ======== ======== ========
*The calculated diluted per share amounts for 2001 are anti-dilutive,
therefore, amounts shown are equal to the basic per share calculation.
