Exhibit 10.6
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
ENTERED INTO AS OF DECEMBER 1, 1993 AMONG GRAHAM CORPORATION,
GRAHAM MANUFACTURING CO., INC. AND JAMES R. LINES
     THIS AMENDMENT, is made and entered into as of September 26, 1996, by and
among Graham Corporation, a Delaware corporation with offices at 20 Florence
Avenue, Batavia, New York 14020 (the “Holding Company”), Graham Manufacturing
Co., Inc., a New York corporation with offices at 20 Florence Avenue, Batavia,
New York 14020 (“GMC”), and James R. Lines currently residing at 11 Hillside
Parkway, Lancaster, New York 14086 (the “Executive”).
WITNESSETH
     WHEREAS, the Holding Company and GMC have entered into an Employment
Agreement with the Executive entered into as of December 1, 1993 (the
“Employment Agreement”); and
     WHEREAS, the Holding Company, GMC and the Executive wish to amend certain
provisions of the Employment Agreement;
     NOW, THEREFORE, the Holding Company, GMC and the Executive, intending to be
legally bound hereby, agree as follows:
     1. The final sentence of Section 2 of the Employment Agreement be and
hereby is amended to read in its entirety as follows:
“The Executive shall devote his full time during GMC’s hours of work to the
business and affairs of GMC and shall use his best efforts, skill and ability in
performing his duties on behalf of GMC.”
     2. Section 4 of the Employment Agreement be and hereby is amended to read
in its entirety as follows:
“4. Base Compensation. As the base compensation for all services to be rendered
by the Executive in any capacity to GMC and its affiliates, GMC agrees to pay to
the Executive, and the Executive shall accept, a salary at a rate of $104,354
per annum, payable in arrears in equal monthly installments, subject to such
deductions and withholdings as may be required by law. During the fourth quarter
of each year, GMC will review the salary rate of the Executive, taking into
consideration such factors as the Executive’s performance during the preceding
year and such other matters as it deems relevant and, in its sole discretion,
may increase the salary of the Executive for the following calendar year, to be
effective from January 1 of such following year, to such rate and for such
period of time as GMC deems proper, provided that GMC shall in no event be
required to grant any such increase. However, in the event that any person or
entity acquires twenty percent (20%) or more of the outstanding equity stock of
the Holding Company or GMC, who was not an owner of twenty percent of the equity
stock of either the Holding Company (in the case of an acquisition of Holding
Company stock) or GMC (in the case of an acquisition of GMC stock) prior to
December 1, 1993, or in the event that any person

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or entity acquires twenty percent (20%) or more of the assets of either the
Holding Company or GMC who was not an owner of twenty percent of the assets of
either the Holding Company (in the case of an acquisition of Holding Company
assets) or of GMC (in the case of an acquisition of GMC assets) prior to
December 1, 1993 then, subsequent to such acquisition of twenty percent stock or
twenty percent asset ownership of either the Holding Company or GMC by any such
person or entity: (1) if for any calendar year a salary increase at least equal
to the increase in the U.S. City All-Items Consumer Price Index for Urban Wage
Earners and Clerical Workers during the previous twelve months, is not granted;
or if (2) the Executive’s base salary is decreased at any time, then in either
event the Executive may in his sole discretion terminate this Agreement upon
thirty days’ written notice given at any time during the calendar year for which
no such increase was granted, or during the twelve month period following any
such decrease in salary, and thereupon GMC shall be obligated to pay the
Executive the amounts, and provide the benefits, specified in Section 9.3 of
this Agreement.”
     3. Section 5 of the Employment Agreement be and hereby is amended by
replacing the words “The Executive Bonus Plan” with the words “The Incentive
Compensation Plan (formerly the Executive Bonus Plan)”.
     4. Section 7 of the Employment Agreement be and hereby is amended to read
in its entirety as follows:
“7. Automobile Allowance.”
“7.1 GMC shall pay the Executive an automobile allowance of $8,550 per annum
(the “Automobile Allowance”). Neither the Automobile Allowance nor any portion
of it shall be included as Base Compensation for the purpose of eligibility for
possible increases in Base Compensation as provided by Section 4 of this
Agreement. During the fourth quarter of each calendar year, GMC will review the
automobile allowance amount of the Executive and, in its discretion, may
increase the automobile allowance paid to the Executive for the following
calendar year, to be effective from January 1 of the following year, to such
increased rate and for such period of time as GMC deems proper, provided that
GMC shall not be required to grant any such increase.”
“7.2 The Executive represents that he now carries automobile liability
insurance, with respect to any automobile owned by him, for injuries to persons
and property.”
     5. Section 9.3 of the Employment Agreement be and hereby is amended by
deleting subsection (c) of the fourth sentence.
     6. Section 9.3 of the Employment Agreement be and hereby is further amended
by deleting the last sentence and adding the following sentences:
“In addition to other amounts payable to the Executive under this Section 9.3,
the Holding Company and GMC shall pay to the Executive Accrued Bonus as defined

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hereinafter. For purposes of this Section 9.3, Accrued Bonus shall mean any
amount of bonus with respect to any year prior to the year in which dismissal
without cause occurs (“Prior Bonus Year”) calculable by applying the formula
prescribed by the Incentive Compensation Plan (formerly the Executive Bonus
Plan) of Graham Corporation as it existed on December 31 of such Prior Bonus
Year and employing in the application of such formula the goals, ratios and
weighting percentages and other variable figures which the Bonus Plan calls for
the Holding Company’s Board or any Committee thereof to determine annually
(“Bonus Plan Variables”) which the Holding Company’s Board of Directors or any
Committee thereof adopted for purposes of the Bonus Plan prior to December 31 of
such Prior Bonus Year. With respect to any Prior Bonus Year for which neither
the Holding Company’s Board nor any Committee thereof adopted Bonus Plan
Variables prior to December 31 of such year, the Bonus Plan Variables adopted
most recently prior to the commencement of the Prior Bonus Year in issue shall
be employed for purposes of calculating the amount of Accrued Bonus payable
pursuant to this Agreement. Notwithstanding any other provision of this Section,
no Accrued Bonus shall be payable pursuant to Section 9.3 of this Agreement for
any Prior Bonus Year with respect to which a bonus amount was paid to and
accepted by the Executive. In the event that the provisions of this Section 9.3
are triggered by discharge of the Executive without cause by GMC, the Executive
shall resign from all offices and directorships of the other entity and of all
subsidiaries and affiliates of the Holding Company, upon payment to the
Executive of the amount referred to in subsection (a) of the second sentence of
this Section 9.3, payment of the amount referred to in subsection (b) of the
second sentence of this Section 9.3 (or the first installment thereof) and
Accrued Bonus, if any.”
     7. The Employment Agreement be and hereby is amended by adding the
following section:
“9.5 Non-duplication. In the event that the Executive shall be a party to any
other contract, agreement or arrangement providing termination payments (other
than retirement or similar benefits or pursuant to any plan providing for stock
options or appreciation rights) upon a cessation of service for GMC, any
compensation or other benefits provided to the Executive under such other
contract, agreement or arrangement and paid to the Executive shall be applied to
offset the obligations of GMC to pay a lump sum equal to twelve months’ salary
as provided by Section 9.3 hereof, it being intended that such lump sum payment
provided under Section 9.3 hereof not duplicate payments otherwise due to the
Executive on account of his cessation of service.”
     8. Section 16 of the Employment Agreement be and hereby is amended by
adding the following sentence:
“Any action or proceeding brought by either party against the other arising out
of or related to the Agreement shall be brought only in a state court of
competent jurisdiction located in the County of Erie, State of New York or the
Federal District

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Court for the Western District of New York located in Erie County, New York and
the parties hereby consent to the personal jurisdiction of said courts.”
     9. All other terms and conditions of the Employment Agreement remain
unchanged and in full force and effect.
     IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as
of the day and year first above written.

          (Corporate Seal)   GRAHAM CORPORATION
 
       
 
  By:    
 
     
 
 Chairman, President and Chief Executive Officer
 
        (Corporate Seal)   GRAHAM MANUFACTURING CO., INC.
 
       
 
  By:    
 
     
 
 President
 
       
 
     
 
 James R. Lines

         
Attest:
       
 
 
 
   

     
STATE OF NEW YORK
   )
 
   : ss.:
COUNTY OF GENESEE
   )

     On the 26 day of September, 1996, before me personally came F. D. Berkeley,
to me known, who, being by me duly sworn, did depose and say that he resides at
50 Old Mill Road, Rochester, New York; that he is Chairman, President and Chief
Executive Officer of Graham Corporation described in and which executed the
attached instrument; that he knows the seal of said corporation and that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by authorizations of the Board of Directors of said corporation, and that he
signed his name thereto by like authority.

     
 
 
 
 Notary Public

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STATE OF NEW YORK
   )
 
   : ss.:
COUNTY OF GENESEE
   )

     On the 27th day of September, 1996, before me personally came Alvaro
Cadena, to me known, who, being by me duly sworn, did depose and say that he
resides at 4 LePere Drive, Pittsford, New York; that he is President of Graham
Manufacturing Co., Inc. described in and which executed the attached instrument;
that he knows the seal of said corporation and that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authorizations of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.

     
 
 
 
 Notary Public

     
STATE OF NEW YORK
   )
 
   : ss.:
COUNTY OF GENESEE
   )

     On the 22nd day of October, 1996, before me personally came James R. Lines,
to me known to be the person described in and who executed the attached
instrument and acknowledged that he executed the same.

     
 
 
 
 Notary Public