Document:

Exhibit 10.6

 

EXHIBIT 10.6

EMPLOYMENT AGREEMENT

     AGREEMENT,
dated as of the 28th day of October, 2005, by and among Argo-Tech Corporation, a
Delaware corporation (the “Company”), and Michael S. Lipscomb (the “Executive”).

     WHEREAS, the Company desires to employ the Executive and the Executive is willing to accept
employment with the Company, all on the terms and conditions set forth below;

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:

     1. Employment Period. Subject to the terms and conditions of this Agreement, including
Section 3, the Company hereby agrees to employ the Executive, and the Executive hereby accepts
employment with the Company, for the period commencing on the date hereof (the “Effective
Date”) and ending as provided in the next sentence (such period, the “Employment
Period”). The Employment Period shall end on the third anniversary of the date hereof;
provided, that the Employment Period shall automatically be renewed for successive one-year
periods, unless the Company or Executive gives the other party written notice of the election not
to renew the Employment Period at least 90 days prior to the expiration of the Employment Period;
provided, however, the Employment Period shall be subject to early termination as provided
in Section 3 hereof.

     2. Terms of Employment.

     (a) Position and Duties. During the Employment Period, the Executive shall serve as Chief
Executive Officer of the Company with the appropriate authority, duties and responsibilities as are
customarily attendant to such position at other similarly situated companies with significant
private equity ownership, subject, in all instances, to the general supervisory power of the
Company’s board of directors (the “Board”) under applicable corporate law. During the
Employment Period, the Executive shall serve as a member of the management committee of V.G.A.T.
Investors, LLC (“Parent”) and the Board. Upon the termination or expiration of the
Employment Period, Executive shall resign as a member of the management committee, board of
directors or any equivalent body of Parent and its subsidiaries, as the case may be and such
obligation to resign shall survive the termination of this Agreement.

          (i) During the Employment Period, Executive shall report solely and directly to the Board and
excluding any periods of vacation and sick leave to which the Executive is entitled, Executive
agrees to devote substantially all of his business time and attention to the business and affairs
of the Company and to use the Executive’s reasonable best efforts to perform faithfully and
efficiently the duties and responsibilities assigned to Executive hereunder; provided that
Executive shall be entitled to serve on the board of directors of Argo-Tracker Corporation to the
extent that the management committee of Parent determines in its reasonable discretion that such
service does not materially detract from the Executive’s performance of his duties hereunder.

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          (ii) The Executive represents and warrants to the Company (A) that he is able to enter into
this Agreement, that his ability to enter into this Agreement and to fully perform his duties of
employment are not limited to or restricted by any agreements, understandings instruments, orders,
judgments or decrees to which Executive is a party or by which he is bound, (B) Executive is not a
party to or bound by any employment agreement, noncompete agreement or confidentiality agreement
with any other person, and (C) upon the execution and delivery of this Agreement by the Employer,
this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance
with its terms. For the purposes of this Agreement, the term “person” means any natural person,
corporation, partnership, limited liability partnership, limited liability company, or any other
entity of any nature.

     (b) Compensation.

          (i) Annual Base Salary. The Executive shall receive an annual base salary (as in
effect from time to time, the “Annual Base Salary”) of $543,828, which Annual Base Salary
shall be payable in regular installments in accordance with the Company’s general payroll
practices. The Annual Base Salary will be subject to periodical review in accordance with Company
policy, and the Executive’s Base Salary shall be increased annually by no less than a percentage
equal to the percentage increase, if any, in the Consumer Price Index in the prior twelve month
period.

          (ii) Annual Bonus. During the Employment Period, the Executive shall participate in
such bonus arrangements as may be approved by the Compensation Committee of the Board (the
“Compensation Committee”) based on performance criteria relating to the Company’s and the
Executive’s performance to be determined by the Board on an annual basis (the aggregate of all
payments made under such bonus arrangements being herein referred to as the “Annual
Bonus”).

          (iii) Employee Benefit Plans. During the Employment Period, except as otherwise
expressly provided herein, the Executive shall be entitled to participate in all compensation,
incentive, employee benefit, welfare and other plans, practices, policies and programs and fringe
benefits (collectively, “Employee Benefit Plans”) that are provided or made available by
the Company generally to senior executive officers of the Company.

          (iv) Vacation. During the Employment Period, Executive shall be entitled to four (4)
weeks of paid vacation during each calendar year, pro-rated, in the case of any partial year, for
the actual number of days the Executive was employed by the Company during such calendar year.

          (v) Gross Up Payment. Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined (as hereafter provided) that any payment by the Company to or
for the benefit of the Executive made as a result of the termination by the Company without Cause
of Executive’s employment with the Company and its Subsidiaries, whether paid pursuant to the terms
of this Agreement or otherwise (a “Payment”), would, in connection with the change of
control of the Company occurring as a result of the merger (the “Merger”) of Vaughn Merger
Sub, Inc., with and into AT Holdings Corporation which was consummated on the date hereof (and not
in connection with any

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subsequent change of control of the Company that occurs at any time following the consummation
of the Merger), be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code,
or any interest or penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties are hereafter collectively referred to as the “Excise Tax”),
then the Executive shall be entitled to receive an additional payment or payments (collectively, a
“Gross-Up Payment”). The Gross-Up Payment shall be in an amount such that, after payment
by the Executive of all taxes (including any interest or penalties imposed with respect to such
taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment, such amount to be used to
satisfy such Excise Tax. The Company and the Executive each shall cooperate with the other in
connection with the determination of the amount of any Gross-Up Payment provided for herein. Such
cooperation shall include without limitation providing the other party access to and copies of any
books, records and documents in the possession of the Company or the Executive, as the case may be,
that are reasonably requested by the other party.

     3. Termination of Employment.

     (a) Death, Disability or Non-renewal. The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment Period or upon non-renewal of the
Employment Period by the Company or Executive as provided in Section 1 above. If the Company
determines in good faith that the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of “Disability” set forth below), it may give to the Executive
written notice in accordance with Section 7(c) of this Agreement of its intention to terminate the
Executive’s employment. In such event, the Executive’s employment with the Company shall terminate
effective on the receipt of such notice by the Executive (the “Disability Effective Date”).
For purposes of this Agreement, “Disability” shall mean a determination by the Board in its good
faith judgment with input from appropriate medical personnel that Executive is unable to
substantially perform his job responsibilities as a result of chronic illness, physical, mental or
any other disability for a period of 180 days or more in any 365 consecutive day period. The
Executive shall co-operate and make himself available for any medical examination reasonably
required by the Company with respect to any determination of the Disability of the Executive.

     (b) With or Without Cause. The Company may terminate the Executive’s employment during the
Employment Period with or without Cause. Any election by the Company to not renew the Employment
Period pursuant to Section 1 will be deemed to be a termination by the Company without Cause. For
purposes of this Agreement, “Cause” shall mean:

     (i) Executive is indicted or charged with, or pleads guilty or nolo contendere to, (A) a
felony or (B) a crime involving moral turpitude that is either materially detrimental to the
Company or that which brings the Company into public disgrace or disrepute;

     (ii) in carrying out his duties hereunder, the Executive engages in conduct that constitutes
gross neglect or willful misconduct;

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          (iii) the Executive engages in willful misconduct resulting in or intended to result in direct
personal gain to Executive at the Company’s expense or that brings the Company into public disgrace
or disrepute, or the Executive has made, or is aware of, any material and knowing misrepresentation
to Parent or any of its subsidiaries in any Transaction Document (as defined in that certain
Agreement and Plan of Merger, dated the date hereof, by and among Parent, the Company, AT Holdings
Corporation, Greatbanc Trust Company, Vaughn Merger Sub, Inc. and Paul R. Keen, as Stockholders’
Representative);

          (iv) the Executive breaches any material provision of this Agreement (including Section 5
hereof) or breaches in any material respect any Company policy governing employee conduct in the
workplace, including without limitation, policies relating to the use of illicit drugs, alcohol
abuse and sexual harassment, and such breach has not been cured prior to 30 days following notice
from the Company;

          (v) the Executive’s repeated refusal to perform duties or responsibilities as reasonably
directed by the Board in writing; or

          (vi) the Executive’s material breach of a fiduciary obligation to the Company or a material
breach of any confidentiality or non-competition obligations.

     (c) Good Reason. The Executive’s employment may be terminated by the Executive with or
without Good Reason. Any election by Executive to not renew the Employment Period pursuant to
Section 1 will be deemed to be a termination by the Executive without Good Reason. For purposes of
this Agreement, “Good Reason” shall mean a termination by Executive of his employment on thirty
(30) days’ written notice given by him to the Company following the occurrence of any of the
following events, which notice shall be given within 10 days following Executive becoming aware of
such occurrence, without his express prior written consent, unless all grounds for termination
shall have been fully cured prior to thirty (30) days after he gives notice to the Company
requesting cure:

          (i) any failure of the Company to continue Executive as Chief Executive Officer of the
Company;

          (ii) any material diminution in Executive’s responsibilities or authorities under this
Agreement or the assignment to Executive of duties that are materially inconsistent with, or
materially impair his ability to perform, the duties then assigned to him; or any change in the
reporting structure so that Executive is required to report to any person other than the Board;

          (iii) any material breach by the Company of any of its obligations under this Agreement which
has not been cured prior to 30 days following notice from Executive of such breach; or

          (iv) any failure of the Company to obtain the assumption in writing of its obligations under
this Agreement by any successor to all or substantially all of its business or assets within thirty
(30) days after any reconstruction, amalgamation, combination, merger, consolidation, sale,
liquidation, dissolution or similar transaction.

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     (d) Notice of Termination. Any termination by the Company or by the Executive shall be
communicated by Notice of Termination to the other party hereto given in accordance with Section
7(c) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written
notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets 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 and
(iii) if the Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall
not waive any right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the
Executive’s or the Company’s rights hereunder.

     (e) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is
terminated by the Company other than for Disability, the date of receipt of the Notice of
Termination or any later date specified therein within 30 days of such notice, (ii) if the
Executive’s employment is terminated by reason of death or Disability, the Date of Termination
shall be the date of death of the Executive or the Disability Effective Date, as the case may be,
(iii) if the Executive’s employment is terminated by the Executive, the Date of Termination shall
be thirty days after the giving of such notice by the Executive; provided that following
receipt of such notice, the Company may elect to immediately terminate the Executive’s employment
hereunder and such termination will still be deemed to be a termination by Executive, however, the
Date of Termination shall be deemed to be date the Company terminates his employment and (iv) if
the Executive’s employment is terminated as a result of non-renewal of the Employment Period by the
Company or the Executive pursuant to Section 1, the last day of the then current Employment Period.

     4. Obligations of the Company upon Termination.

     (a) Death or Disability. If, during the Employment Period the Executive’s employment shall
terminate on account of death or Disability the Company shall pay to the Executive or his estate:

          (i) the Executive’s Annual Base Salary through the Date of Termination within 30 days after
the Date of Termination and, at the time it would otherwise be due to be paid, any Annual Bonus for
any fiscal year of the Company that has ended prior to the year in which such termination occurs
(“Prior Year’s Bonus”) to the extent not theretofore paid; and

          (ii) an amount equal to the product of (x) the Annual Bonus that would have been paid to the
Executive for such fiscal year and (y) a fraction, the numerator of which is the number of days in
the fiscal year in which the Date of Termination occurs through the Date of Termination and the
denominator of which is 365, to the extent not theretofore paid (such amount, the “Accrued
Bonus”), at such time as the Annual Bonus would have been paid in the ordinary course;

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          (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide
to the Executive or his estate or beneficiaries (A) a cash lump sum amount equal to the product of
(x) the Executive’s Annual Base Salary and (y) a fraction, the numerator of which is the number of
Executive’s accrued but unused vacation days and the denominator of which is 365 (the “Accrued
Vacation Amount”) and (B) any other amounts (including any unreimbursed business expenses) or
benefits required to be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company and its affiliated
companies through the Date of Termination (the Accrued Vacation Amount and such other amounts and
benefits shall be hereinafter referred to as the “Other Benefits”); and

     (b) By the Company for Cause; By the Executive Other than for Good Reason. If the Executive’s
employment is terminated for Cause or the Executive terminates his employment without Good Reason
during the Employment Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive, to the extent not previously paid, (i)
his Annual Base Salary through the Date of Termination, (ii) his Prior Year’s Bonus and (iii) the
Other Benefits.

     (c) By the Company Other than for Cause, Death or Disability; By the Executive for Good
Reason. If, during the Employment Period the Executive’s employment is terminated by the Executive
for Good Reason or by the Company other than for Cause, other than on account of death or
Disability:

          (i) subject to continued compliance by the executive of the covenants set forth in Section 5
hereof, the Company shall pay to the Executive:

     (A) the Executive’s Annual Base Salary through the Date of Termination within 30 days after
the Date of Termination and any Prior Year’s Bonus to the extent not theretofore paid; and

     (B) the amount equal to the sum of the Executive’s current Annual Base Salary and Annual Bonus
for the preceding fiscal year, payable over the one year period following termination in regular
equal installments in accordance with the Company’s general payroll practices;

          (ii) the Company shall provide the Executive with the Other Benefits; and

          (iii) the Company shall provide the Executive continued coverage under the Company’s group
health plans until the earlier of (x) the first anniversary of the Date of Termination and (y) the
date Executive becomes eligible for comparable coverage under health plans of any successor
employer (and, for the avoidance of doubt, the termination date for COBRA purposes will be the
first anniversary of the Date of Termination).

     (d) Release. The severance payments and such benefits to be provided by the Company pursuant
to this Section 4 shall (i) be in lieu of any other payments by the Company to Executive and (ii)
be subject to Executive’s execution (other than in the case of Executive’s death) of a release
agreement in substantially the form attached hereto as Exhibit A,

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     5. Noncompetition; Nonsolicitation; Etc. Executive acknowledges that in the course of his
employment with the Company he will become familiar with the Company’s and its subsidiaries’ trade
secrets and other confidential information concerning the Company and such subsidiaries
(collectively, the “Confidential Information”) and that his services will be of special,
unique and extraordinary value to the Company and its subsidiaries. Therefore, Executive agrees
and acknowledges that:

     (a) Noncompetition. During the Non-Competition Period (as defined below), Executive shall
not, directly or indirectly, either for himself or for any other individual, corporation,
partnership, joint venture or other entity, participate in any business (including, without
limitation, any division, group or franchise of a larger organization) anywhere in the Non
Competition Area (defined below) which engages or which proposes to engage in the promotion,
development, sale, distribution or production of (i) any aircraft engine fuel pumps, (ii)
commercial and military airframe products and services, (iii) aerial refueling pumps, (iv) ground
fueling components, (v) fuel management systems, (vi) cryogenic pumps, or (vii) any products or
product lines that compete with any of the foregoing or other products or product lines of the
Company at any time during the Executive’s employment with the Company or at the time of
Executive’s termination of employment with the Company. For purposes of this Agreement, the term
“participate in” shall include, without limitation, having any direct or indirect interest in any
corporation, partnership, joint venture or other entity, whether as a sole proprietor, owner,
stockholder, partner, joint venturer, creditor or otherwise, or rendering any direct or indirect
service or assistance to any individual, corporation, partnership, joint venture and other business
entity (whether as a director, officer, manager, supervisor, employee, agent, consultant or
otherwise). The obligations and covenants contained in this Section 5(a) shall endure so long as
Employee is employed by the Company and for a period of two years thereafter. (the
“Non-Competition Period”) For the purposes of this Agreement, “Non Competition
Area” means anywhere in the world. Notwithstanding the above, Executive shall not be
prohibited from owning up to 3% of the outstanding stock of a corporation which is publicly traded,
so long as Executive has no active participation in the business of such corporation.

     (b) Nonsolicitation. During the Non-Competition Period, Executive shall not directly or
indirectly (i) induce or attempt to induce any employee of the Company or any of its subsidiaries
to leave the employ of the Company or such subsidiary, or in any way interfere with the
relationship between the Company or any subsidiary and any employee thereof, including inducing or
attempting to induce any union, employee or group of employees to interfere with the business or
operations of the Company or its subsidiaries, (ii) hire any person who was an employee of the
Company or any subsidiary unless at least twelve months has elapsed since the termination of such
employee’s employment with the Company or any subsidiary, as the case may be, or (iii) induce or
attempt to induce any customer, supplier, distributor, franchisee, licensee or other business
relation of the Company or any subsidiary to cease doing business with the Company or such
subsidiary, or in any way interfere with the relationship between any such customer, supplier,
distributor, franchisee, licensee or business relation and the Company or any subsidiary.

     (c) Confidentiality.

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          (i) The continued success of the Company and its subsidiaries and other affiliates depends
upon the use and protection of a large body of confidential and proprietary information, including,
without limitation, confidential and proprietary information now existing or to be developed in the
future. “Confidential Information” will be defined to include all information of any sort (whether
merely remembered or embodied in a tangible or intangible form or medium) that is (i) related to
the Company’s or its subsidiaries’ or other affiliates’ prior, current or potential business or
operations and (ii) not generally or publicly known. Confidential Information includes, without
limitation, the information, observations and data of the Company and its subsidiaries and other
affiliates including, without limitation, designs, drawings, photographs and other works and
reports (including, without limitation, all Company Works); programs, software, source code, object
code, diagrams, flow charts, manuals, documentation and databases; know-how, data, designs,
specifications, improvements, inventions, devices, new developments, methods and processes, whether
patentable or unpatentable and whether or not reduced to practice; all technology and trade
secrets; information concerning development, acquisition or investment opportunities in or
reasonably related to the Company’s or its subsidiaries’ or other affiliates’ business or industry
of which Executive is aware or becomes aware during the term of his/her employment, the persons or
entities that are current, former or prospective suppliers or customers of any one or more of them
during Executive’s employment with the Company; development, transition and transformation plans,
methodologies and methods of doing business, strategic, marketing and expansion plans, including
plans regarding planned and potential sales, pricing and cost information, financial and business
plans, employee, customer and supplier lists and telephone numbers, locations of sales
representatives, new and existing programs and services, prices and terms, customer service,
integration processes, requirements and costs of providing service, support and equipment; and all
similar and related information in whatever form or medium.

          (ii) Executive shall not disclose or use for his own account any of such Confidential
Information, except as reasonably necessary for the performance of his duties under this Agreement,
without the prior written consent of the Board, unless and to the extent that any Confidential
Information (i) becomes generally known to and available for use by the public other than as a
result of Executive’s breach or actions in violation of this Agreement or other improper acts or
omissions to act or otherwise (ii) is required to be disclosed pursuant to any applicable law or
court order, provided, however that, Executive must give Company prompt written notice of any such
legal requirement, disclose no more information than is so required and seek confidential treatment
where available, and cooperate fully with all efforts by the Company to obtain a protective order
or similar confidentiality treatment for such information. Upon the termination of Executive’s
employment hereunder, or at any other time the Company may request in writing, Executive agrees to
deliver to the Company all memoranda, notes, plans, records, reports, notebooks (and similar
repositories of or containing Confidential Information) and other documents (and all copies,
summaries and extracts thereof, in whatever form or medium) relating to the business or operations
of the Company or its subsidiaries or other affiliates or that otherwise constitute Confidential
Information, and at any time thereafter, if any such materials are brought to Executive’s attention
or Executive discovers them in his possession or control, Executive shall deliver such materials to
the Company immediately upon such notice or discovery

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     (d) Inventions and Patents. If Executive creates, invents, designs, develops, contributes to
or improves any works of authorship, inventions, whether patentable or unpatentable and whether or
not reduced to practice, know-how, data, processes, methods, programs, systems, materials,
documents or other work product or other intellectual property, either alone or in conjunction with
third parties, at any time during Executive’s employment by or engagement with the Company
(“Works”), to the extent that such Works were created, invented, designed, developed,
contributed to, or improved with the use of any Company resources and/or within the scope of such
employment or engagement and/or relate to the business or operations, or actual or demonstrably
anticipated research or development, of the Company or its subsidiaries or other affiliates
(collectively, the “Company Works”), Executive shall promptly and fully disclose such
Company Works to the Company. Any copyrightable work falling within the definition of Company
Works shall be deemed a “work made for hire” as such term is defined in 17 U.S.C. § 101. Executive
hereby (i) irrevocably assigns, transfers and conveys, to the extent permitted by applicable law,
all right, title and interest in and to the Company Works on a worldwide basis (including, without
limitation, rights under patent, copyright, trademark, trade secret, unfair competition and related
laws) to the Company or such other entity as the Company shall designate, to the extent ownership
of any such rights does not automatically vest in the Company under applicable law and (ii) waives
any moral rights therein to the fullest extent permitted under applicable law. Executive agrees
that he will not use any Company Works for his personal benefit, the benefit of a competitor, or
for the benefit of any other person or entity other than the Company. Executive agrees to execute
any further documents and take any further actions requested by the Company to assist it in
validating, effectuating, maintaining, protecting, enforcing, perfecting, recording, patenting or
registering any of its rights hereunder.

     (e) Enforcement. The parties to this Agreement hereby agree and stipulate that (i) the
restrictions contained in this Agreement are reasonable and necessary in order to protect the
Company’s and its subsidiaries’ legitimate business interests and (ii) in the event of any breach
or violation of this Agreement or of any provision hereof by Executive, the Company and its
subsidiaries will have no adequate remedy at law and will suffer irreparable loss and damage
thereby. The parties hereby further agree and stipulate that in the event of any such breach or
violation, either threatened or actual, the Company’s and its subsidiaries’ rights shall include,
in addition to any and all other rights available to the Company and its subsidiaries at law or in
equity, the right to seek and obtain any and all injunctive relief or restraining orders available
to it in courts of proper jurisdiction, so as to prohibit, bar, and restrain any and all such
breaches or violations by Executive. The prevailing party to any legal action, arbitration or
other proceeding commenced in connection with enforcing any provision of this Section 5, including
without limitation, obtaining the injunctive relief provided by this Section 5 shall be entitled to
recover all court costs, reasonable attorneys’ fees, and related expenses incurred by such party.
Executive further agrees that no bond need be filed in connection with any request by the Company
and its subsidiaries for a temporary restraining order or for temporary or preliminary injunctive
relief.

     (f) Additional Acknowledgments. Executive acknowledges that the provisions of this Section 5
are in consideration of: (i) employment with the Company, (ii) the issuance of certain limited
liability company interests of V.G.A.T. Investors, LLC to the Executive and (iii) additional good
and valuable consideration as set forth in this Agreement. In

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addition, Executive acknowledges (i) that the business of the Company and its subsidiaries is
international in scope and without geographical limitation and (ii) notwithstanding the state of
incorporation or principal office of the Company or any of its subsidiaries, or any of their
respective executives or employees (including the Executive), it is expected that the Company will
have business activities and have valuable business relationships within its industry throughout
the world. Executive acknowledges that he has carefully read this Agreement and has given careful
consideration to the restraints imposed upon Executive by this Agreement, and is in full accord as
to their necessity for the reasonable and proper protection of confidential and proprietary
information of the Company and its subsidiaries now existing or to be developed in the future.
Executive expressly acknowledges and agrees that each and every restraint imposed by this Agreement
is reasonable with respect to subject matter, time period and geographical area.

     6. Successors.

     (a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

     (b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

     7. Miscellaneous.

     (a) This Agreement and any dispute, disagreement, or issue of construction or interpretation
arising hereunder whether relating to its execution, its validity, the obligations provided therein
or performance shall be governed or interpreted according to the internal laws of the State of New
York applicable to contracts entered into and to be performed solely within such State without
regard to choice of law considerations. The parties hereto hereby waive, to the fullest extent by
applicable law, any right to trial by jury with respect to any action or proceeding arising out of
or relating to this Agreement.

     (b) Any disputes with regard to this Agreement that is not resolved by mutual agreement, other
than as provided in Section 5(e) hereof, shall be resolved by binding arbitration before the
American Arbitration Association (“AAA”) in New York City pursuant to the rules of AAA.
The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§1-16 and shall
be conducted in accordance with the rules and procedures of AAA. Any judgment upon the reward
rendered by the arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator’s decision shall set forth a reasoned basis for any award of damages or findings of
liability. The arbitrator shall not have the power to award damages in excess of actual
compensatory damages and shall not multiply actual damages or award punitive damages, and each
party hereby irrevocable waives any claim to such damages. The costs of AAA and the arbitrator
shall be borne by the Company. Each party shall bear its own costs (including, without limitation,
legal fees and fees of any experts) and out-of-pocket expenses.

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     (c) all notices, demands or other communications to be given or delivered under or by reason
of the provisions of this Agreement will be in writing and will be deemed to have been given when
delivered personally, mailed by certified or registered mail, return receipt requested and postage
prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the
recipient with telephonic confirmation by the sending party. Such notices, demands and other
communications will be sent to the address indicated below:

If to the Executive:

Michael S. Lipscomb

23555 Euclid Avenue

Euclid, OH 44117

If to the Company:

Argo-Tech Corporation

c/o Vestar Capital Partners IV, L.P.

245 Park Avenue, 41st Floor

New York, New York 10167

Telecopy: (212) 808 4922

Attention: John Woodard

                   General Counsel

and

c/o Greenbriar Equity Group LLC

555 Theodore Fremd Avenue

Rye, New York 10580

Telecopy: (914) 925-9699

Attention: Reginald L. Jones

                   John Daileader

with a copies (which shall not constitute notice to the Company) to:

Kirkland & Ellis LLP

Citigroup Center

153 East 53rd Street

New York, NY 10022

Telecopy: (212) 446-4900

Attention: Michael Movsovich, Esq.

                   Christopher Neumann, Esq.

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or such other address or to the attention of such other person as the recipient party shall have
specified by prior written notice to the sending party. Any notice under this Agreement shall be
deemed to have been given when so delivered, sent or mailed.

     (d) Subject to the provisions of Section 4(c), there shall be no limitation on the ability of
the Company to terminate the Executive at any time with or without Cause.

     (e) Whenever possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this Agreement is held to
be invalid, illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never been contained
herein.

     (f) The captions of this Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and legal representatives.

     (g) The Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or
regulation.

     (h) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder shall not be deemed to be a waiver of such provision or right or any other provision
or right of this Agreement.

     (i) From and after the Effective Date this Agreement shall supersede any other employment
agreement between the parties with respect to the subject matter hereof.

* * * * * * * * *

12

 

     IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents to be executed in
its name on its behalf, all as of the day and year first above written.

 

	 	 	 	 	 	 
	 	 	/s/ Michael S. Lipscomb
	 	 	 
	 	 	MICHAEL S. LIPSCOMB
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	ARGO-TECH CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	/s/ Paul P. Keen 
	 

	 	 	 	 
	 

	 	Title:	 	Vice President
	 

	 	 	 	 

13

 

Exhibit A

FORM OF RELEASE AGREEMENT

     In consideration of receipt of severance payments and benefits as set forth in Section 4 of
the Employment Agreement, dated as of October ___, 2005, by and between Argo-Tech Corporation (the
“Company”) and Michael S. Lipscomb (the “Employment Agreement”), I, Michael S.
Lipscomb, hereby release and discharge the Company, and each of its employees, officers, directors,
stockholders, agents, subsidiaries and other affiliates from, and waive any and all claims,
demands, damages, causes of action or suits (collectively, “Claims”) of any kind or nature
whatsoever that I may have had or may now have against any of them (including, without limitation,
any Claims arising out of or related to my employment with the Company or the termination thereof),
whether arising under contract, tort, statute or otherwise, and whether I know of the claim or not,
including, without limitation, Claims arising under Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act, the Americans with Disabilities Act, the Equal Pay for Equal
Work Act, and any other applicable federal, state or local statutes, rules, codes, or ordinances.
Notwithstanding anything herein to the contrary this release does not cover (i) my rights to the
severance payments and benefits provided in Section 4 of the Employment Agreement; (ii) my rights
to any vested or accrued benefits or rights under the applicable terms of Company plans, programs,
or arrangements; (iii) any Claim by me to enforce the rights arising under or preserved by the
Employment Agreement that survive expressly survive termination of my employment; (iv) any Claim by
me to enforce indemnification rights as provided in the Company’s articles of incorporation; and
(v) my rights in my capacity as an equity holder of V.G.A.T. Investors, LLC and/or AT Holdings
Corporation unless such right is terminated by its terms due to the termination of my employment
with the Company.

     I have not, and shall not hereafter, institute any lawsuit of any kind whatsoever, or file any
complaint or charge, against the Company or any of its former or present employees, officers,
directors, stockholders, agents, subsidiaries, or affiliates, and any of their successors or
assigns, under any federal, state or local statute, rule, regulation or principle of common law
growing out of events released hereunder. I shall not seek employment or reemployment with the
Company. I acknowledge that I have had at least 21 days to review and consider this release
agreement before accepting it. I have been advised to consult with an attorney before signing this
release agreement.

     This release agreement and any dispute, disagreement, or issue of construction or
interpretation arising hereunder whether relating to its execution, its validity, the obligations
provided therein or performance shall be governed or interpreted according to the internal laws of
the State of New York applicable to contracts entered into and to be performed solely within such
State without regard to choice of law considerations. The parties hereto hereby waive, to the
fullest extent by applicable law, any right to trial by jury with respect to any action or
proceeding arising out of or relating to this Agreement.

14

 

	 	 	 	 	 	 
	 	 	 
	 	 	Michael S. Lipscomb
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Dated:	 	 
	 

	 	 	 	 

     Acknowledged and Agreed as of

     ____________, ___:

ARGO-TECH CORPORATION

	 	 	 	 
	By:
	 	 
	 

	 	 
	 

	 	Name:

Title:

15Exhibit 10.7

 

EXHIBIT 10.7

EMPLOYMENT AGREEMENT

     AGREEMENT,
dated as of the 28th day of October, 2005, by and among Argo-Tech Corporation, a
Delaware corporation (the “Company”), and Paul R. Keen (the “Executive”).

     WHEREAS, the Company desires to employ the Executive and the Executive is willing to accept
employment with the Company, all on the terms and conditions set forth below;

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:

     1. Employment Period. Subject to the terms and conditions of this Agreement, including
Section 3, the Company hereby agrees to employ the Executive, and the Executive hereby accepts
employment with the Company, for the period commencing on the date hereof (the “Effective
Date”) and ending as provided in the next sentence (such period, the “Employment
Period”). The Employment Period shall end on the third anniversary of the date hereof;
provided, that the Employment Period shall automatically be renewed for successive one-year
periods, unless the Company or Executive gives the other party written notice of the election not
to renew the Employment Period at least 90 days prior to the expiration of the Employment Period;
provided, however, the Employment Period shall be subject to early termination as provided
in Section 3 hereof.

     2. Terms of Employment.

     (a) Position and Duties. During the Employment Period, the Executive shall serve as Executive
Vice President and General Counsel of the Company with the appropriate authority, duties and
responsibilities as are customarily attendant to such position at other similarly situated
companies with significant private equity ownership, subject, in all instances, to the general
supervisory power of the Company’s board of directors (the “Board”) under applicable
corporate law.

          (i) During the Employment Period, Executive shall report solely and directly to the Chief
Executive Officer of the Company (the “CEO”) and excluding any periods of vacation and sick
leave to which the Executive is entitled, Executive agrees to devote substantially all of his
business time and attention to the business and affairs of the Company and to use the Executive’s
reasonable best efforts to perform faithfully and efficiently the duties and responsibilities
assigned to Executive hereunder.

          (ii) The Executive represents and warrants to the Company (A) that he is able to enter into
this Agreement, that his ability to enter into this Agreement and to fully perform his duties of
employment are not limited to or restricted by any agreements, understandings instruments, orders,
judgments or decrees to which Executive is a party or by which he is bound, (B) Executive is not a
party to or bound by any employment agreement, noncompete agreement or confidentiality agreement
with any other person, and (C) upon the execution and delivery of this Agreement by the Employer,
this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance
with its terms. For the purposes of

1

 

this Agreement, the term “person” means any natural person, corporation, partnership, limited
liability partnership, limited liability company, or any other entity of any nature.

     (b) Compensation.

          (i) Annual Base Salary. The Executive shall receive an annual base salary (as in
effect from time to time, the “Annual Base Salary”) of $279,926, which Annual Base Salary
shall be payable in regular installments in accordance with the Company’s general payroll
practices. The Annual Base Salary will be subject to periodical review in accordance with Company
policy, and the Executive’s Base Salary shall be increased annually by no less than a percentage
equal to the percentage increase, if any, in the Consumer Price Index in the prior twelve month
period.

          (ii) Annual Bonus. During the Employment Period, the Executive shall participate in
such bonus arrangements as may be approved by the Compensation Committee of the Board (the
“Compensation Committee”) based on performance criteria relating to the Company’s and the
Executive’s performance to be determined by the Board on an annual basis (the aggregate of all
payments made under such bonus arrangements being herein referred to as the “Annual
Bonus”).

          (iii) Employee Benefit Plans. During the Employment Period, except as otherwise
expressly provided herein, the Executive shall be entitled to participate in all compensation,
incentive, employee benefit, welfare and other plans, practices, policies and programs and fringe
benefits (collectively, “Employee Benefit Plans”) that are provided or made available by
the Company generally to senior executive officers of the Company.

          (iv) Vacation. During the Employment Period, Executive shall be entitled to four (4)
weeks of paid vacation during each calendar year, pro-rated, in the case of any partial year, for
the actual number of days the Executive was employed by the Company during such calendar year.

          (v) Gross Up Payment. Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined (as hereafter provided) that any payment by the Company to or
for the benefit of the Executive made as a result of the termination by the Company without Cause
of Executive’s employment with the Company and its Subsidiaries, whether paid pursuant to the terms
of this Agreement or otherwise (a “Payment”), would, in connection with the change of
control of the Company occurring as a result of the merger (the “Merger”) of Vaughn Merger
Sub, Inc., with and into AT Holdings Corporation which was consummated on the date hereof (and not
in connection with any subsequent change of control of the Company that occurs at any time
following the consummation of the Merger), be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code, or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties are hereafter collectively referred to as
the “Excise Tax”), then the Executive shall be entitled to receive an additional payment or
payments (collectively, a “Gross-Up Payment”). The Gross-Up Payment shall be in an amount
such that, after payment by the Executive of all taxes (including any interest or penalties imposed
with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the

2

 

Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payment, such amount to be used to satisfy such Excise Tax. The Company and the Executive each
shall cooperate with the other in connection with the determination of the amount of any Gross-Up
Payment provided for herein. Such cooperation shall include without limitation providing the other
party access to and copies of any books, records and documents in the possession of the Company or
the Executive, as the case may be, that are reasonably requested by the other party.

     3. Termination of Employment.

     (a) Death, Disability or Non-renewal. The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment Period or upon non-renewal of the
Employment Period by the Company or Executive as provided in Section 1 above. If the Company
determines in good faith that the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of “Disability” set forth below), it may give to the Executive
written notice in accordance with Section 7(c) of this Agreement of its intention to terminate the
Executive’s employment. In such event, the Executive’s employment with the Company shall terminate
effective on the receipt of such notice by the Executive (the “Disability Effective Date”).
For purposes of this Agreement, “Disability” shall mean a determination by the Board in its good
faith judgment with input from appropriate medical personnel that Executive is unable to
substantially perform his job responsibilities as a result of chronic illness, physical, mental or
any other disability for a period of 180 days or more in any 365 consecutive day period. The
Executive shall co-operate and make himself available for any medical examination reasonably
required by the Company with respect to any determination of the Disability of the Executive.

     (b) With or Without Cause. The Company may terminate the Executive’s employment during the
Employment Period with or without Cause. Any election by the Company to not renew the Employment
Period pursuant to Section 1 will be deemed to be a termination by the Company without Cause. For
purposes of this Agreement, “Cause” shall mean:

          (i) Executive is indicted or charged with, or pleads guilty or nolo contendere to, (A) a
felony or (B) a crime involving moral turpitude that is either materially detrimental to the
Company or that which brings the Company into public disgrace or disrepute;

          (ii) in carrying out his duties hereunder, the Executive engages in conduct that constitutes
gross neglect or willful misconduct;

          (iii) the Executive engages in willful misconduct resulting in or intended to result in direct
personal gain to Executive at the Company’s expense or that brings the Company into public disgrace
or disrepute, or the Executive has made, or is aware of, any material and knowing misrepresentation
to V.G.A.T. Investors, LLC (“Parent”) or any of its subsidiaries in any Transaction
Document (as defined in that certain Agreement and Plan of Merger, dated the date hereof, by and
among Parent, the Company, AT Holdings Corporation, Greatbanc Trust Company, Vaughn Merger Sub,
Inc. and Paul R. Keen, as Stockholders’ Representative);

3

 

          (iv) the Executive breaches any material provision of this Agreement (including Section 5
hereof) or breaches in any material respect any Company policy governing employee conduct in the
workplace, including without limitation, policies relating to the use of illicit drugs, alcohol
abuse and sexual harassment, and such breach has not been cured prior to 30 days following notice
from the Company;

          (v) the Executive’s repeated refusal to perform duties or responsibilities as reasonably
directed by the CEO or the Board in writing; or

          (vi) the Executive’s material breach of a fiduciary obligation to the Company or a material
breach of any confidentiality or non-competition obligations.

     (c) Good Reason. The Executive’s employment may be terminated by the Executive with or
without Good Reason. Any election by Executive to not renew the Employment Period pursuant to
Section 1 will be deemed to be a termination by the Executive without Good Reason. For purposes of
this Agreement, “Good Reason” shall mean a termination by Executive of his employment on thirty
(30) days’ written notice given by him to the Company following the occurrence of any of the
following events, which notice shall be given within 10 days following Executive becoming aware of
such occurrence, without his express prior written consent, unless all grounds for termination
shall have been fully cured prior to thirty (30) days after he gives notice to the Company
requesting cure:

          (i) any failure of the Company to continue Executive as Executive Vice President and General
Counsel of the Company;

          (ii) any material diminution in Executive’s responsibilities or authorities under this
Agreement or the assignment to Executive of duties that are materially inconsistent with, or
materially impair his ability to perform, the duties then assigned to him; or any change in the
reporting structure so that Executive is required to report to any person other than the CEO;

          (iii) any material breach by the Company of any of its obligations under this Agreement which
has not been cured prior to 30 days following notice from Executive of such breach; or

          (iv) any failure of the Company to obtain the assumption in writing of its obligations under
this Agreement by any successor to all or substantially all of its business or assets within thirty
(30) days after any reconstruction, amalgamation, combination, merger, consolidation, sale,
liquidation, dissolution or similar transaction.

     (d) Notice of Termination. Any termination by the Company or by the Executive shall be
communicated by Notice of Termination to the other party hereto given in accordance with Section
7(c) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written
notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets 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 and
(iii) if the Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than

4

 

thirty days after the giving of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive’s or the Company’s rights hereunder.

     (e) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is
terminated by the Company other than for Disability, the date of receipt of the Notice of
Termination or any later date specified therein within 30 days of such notice, (ii) if the
Executive’s employment is terminated by reason of death or Disability, the Date of Termination
shall be the date of death of the Executive or the Disability Effective Date, as the case may be,
(iii) if the Executive’s employment is terminated by the Executive, the Date of Termination shall
be thirty days after the giving of such notice by the Executive; provided that following
receipt of such notice, the Company may elect to immediately terminate the Executive’s employment
hereunder and such termination will still be deemed to be a termination by Executive, however, the
Date of Termination shall be deemed to be date the Company terminates his employment and (iv) if
the Executive’s employment is terminated as a result of non-renewal of the Employment Period by the
Company or the Executive pursuant to Section 1, the last day of the then current Employment Period.

     4. Obligations of the Company upon Termination.

     (a) Death or Disability. If, during the Employment Period the Executive’s employment shall
terminate on account of death or Disability the Company shall pay to the Executive or his estate:

          (i) the Executive’s Annual Base Salary through the Date of Termination within 30 days after
the Date of Termination and, at the time it would otherwise be due to be paid, any Annual Bonus for
any fiscal year of the Company that has ended prior to the year in which such termination occurs
(“Prior Year’s Bonus”) to the extent not theretofore paid; and

          (ii) an amount equal to the product of (x) the Annual Bonus that would have been paid to the
Executive for such fiscal year and (y) a fraction, the numerator of which is the number of days in
the fiscal year in which the Date of Termination occurs through the Date of Termination and the
denominator of which is 365, to the extent not theretofore paid (such amount, the “Accrued
Bonus”), at such time as the Annual Bonus would have been paid in the ordinary course;

          (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide
to the Executive or his estate or beneficiaries (A) a cash lump sum amount equal to the product of
(x) the Executive’s Annual Base Salary and (y) a fraction, the numerator of which is the number of
Executive’s accrued but unused vacation days and the denominator of which is 365 (the “Accrued
Vacation Amount”) and (B) any other amounts (including any unreimbursed business expenses) or
benefits required to be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company and its affiliated
companies through the Date of Termination (the

5

 

Accrued Vacation Amount and such other amounts and benefits shall be hereinafter referred to
as the “Other Benefits”); and

     (b) By the Company for Cause; By the Executive Other than for Good Reason. If the Executive’s
employment is terminated for Cause or the Executive terminates his employment without Good Reason
during the Employment Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive, to the extent not previously paid, (i)
his Annual Base Salary through the Date of Termination, (ii) his Prior Year’s Bonus and (iii) the
Other Benefits.

     (c) By the Company Other than for Cause, Death or Disability; By the Executive for Good
Reason. If, during the Employment Period the Executive’s employment is terminated by the Executive
for Good Reason or by the Company other than for Cause, other than on account of death or
Disability:

          (i) subject to continued compliance by the executive of the covenants set forth in Section 5
hereof, the Company shall pay to the Executive:

     (A) the Executive’s Annual Base Salary through the Date of Termination within 30 days after
the Date of Termination and any Prior Year’s Bonus to the extent not theretofore paid; and

     (B) the amount equal to the sum of the Executive’s current Annual Base Salary and Annual Bonus
for the preceding fiscal year, payable over the one year period following termination in regular
equal installments in accordance with the Company’s general payroll practices;

          (ii) the Company shall provide the Executive with the Other Benefits; and

          (iii) the Company shall provide the Executive continued coverage under the Company’s group
health plans until the earlier of (x) the first anniversary of the Date of Termination and (y) the
date Executive becomes eligible for comparable coverage under health plans of any successor
employer (and, for the avoidance of doubt, the termination date for COBRA purposes will be the
first anniversary of the Date of Termination).

     (d) Release. The severance payments and such benefits to be provided by the Company pursuant
to this Section 4 shall (i) be in lieu of any other payments by the Company to Executive and (ii)
be subject to Executive’s execution (other than in the case of Executive’s death) of a release
agreement in substantially the form attached hereto as Exhibit A,

     5. Noncompetition; Nonsolicitation; Etc. Executive acknowledges that in the course of his
employment with the Company he will become familiar with the Company’s and its subsidiaries’ trade
secrets and other confidential information concerning the Company and such subsidiaries
(collectively, the “Confidential Information”) and that his services will be of special,
unique and extraordinary value to the Company and its subsidiaries. Therefore, Executive agrees
and acknowledges that:

6

 

     (a) Noncompetition. During the Non-Competition Period (as defined below), Executive shall
not, directly or indirectly, either for himself or for any other individual, corporation,
partnership, joint venture or other entity, participate in any business (including, without
limitation, any division, group or franchise of a larger organization) anywhere in the Non
Competition Area (defined below) which engages or which proposes to engage in the promotion,
development, sale, distribution or production of (i) any aircraft engine fuel pumps, (ii)
commercial and military airframe products and services, (iii) aerial refueling pumps, (iv) ground
fueling components, (v) fuel management systems, (vi) cryogenic pumps, or (vii) any products or
product lines that compete with any of the foregoing or other products or product lines of the
Company at any time during the Executive’s employment with the Company or at the time of
Executive’s termination of employment with the Company. For purposes of this Agreement, the term
“participate in” shall include, without limitation, having any direct or indirect interest in any
corporation, partnership, joint venture or other entity, whether as a sole proprietor, owner,
stockholder, partner, joint venturer, creditor or otherwise, or rendering any direct or indirect
service or assistance to any individual, corporation, partnership, joint venture and other business
entity (whether as a director, officer, manager, supervisor, employee, agent, consultant or
otherwise). The obligations and covenants contained in this Section 5(a) shall endure so long as
Employee is employed by the Company and for a period of two years thereafter. (the
“Non-Competition Period”) For the purposes of this Agreement, “Non Competition
Area” means anywhere in the world. Notwithstanding the above, Executive shall not be
prohibited from owning up to 3% of the outstanding stock of a corporation which is publicly traded,
so long as Executive has no active participation in the business of such corporation.

     (b) Nonsolicitation. During the Non-Competition Period, Executive shall not directly or
indirectly (i) induce or attempt to induce any employee of the Company or any of its subsidiaries
to leave the employ of the Company or such subsidiary, or in any way interfere with the
relationship between the Company or any subsidiary and any employee thereof, including inducing or
attempting to induce any union, employee or group of employees to interfere with the business or
operations of the Company or its subsidiaries, (ii) hire any person who was an employee of the
Company or any subsidiary unless at least twelve months has elapsed since the termination of such
employee’s employment with the Company or any subsidiary, as the case may be, or (iii) induce or
attempt to induce any customer, supplier, distributor, franchisee, licensee or other business
relation of the Company or any subsidiary to cease doing business with the Company or such
subsidiary, or in any way interfere with the relationship between any such customer, supplier,
distributor, franchisee, licensee or business relation and the Company or any subsidiary.

     (c) Confidentiality.

          (i) The continued success of the Company and its subsidiaries and other affiliates depends
upon the use and protection of a large body of confidential and proprietary information, including,
without limitation, confidential and proprietary information now existing or to be developed in the
future. “Confidential Information” will be defined to include all information of any sort (whether
merely remembered or embodied in a tangible or intangible form or medium) that is (i) related to
the Company’s or its subsidiaries’ or other affiliates’ prior, current or potential business or
operations and (ii) not generally or publicly known. Confidential Information includes, without
limitation, the information, observations and

7

 

data of the Company and its subsidiaries and other affiliates including, without limitation,
designs, drawings, photographs and other works and reports (including, without limitation, all
Company Works); programs, software, source code, object code, diagrams, flow charts, manuals,
documentation and databases; know-how, data, designs, specifications, improvements, inventions,
devices, new developments, methods and processes, whether patentable or unpatentable and whether or
not reduced to practice; all technology and trade secrets; information concerning development,
acquisition or investment opportunities in or reasonably related to the Company’s or its
subsidiaries’ or other affiliates’ business or industry of which Executive is aware or becomes
aware during the term of his/her employment, the persons or entities that are current, former or
prospective suppliers or customers of any one or more of them during Executive’s employment with
the Company; development, transition and transformation plans, methodologies and methods of doing
business, strategic, marketing and expansion plans, including plans regarding planned and potential
sales, pricing and cost information, financial and business plans, employee, customer and supplier
lists and telephone numbers, locations of sales representatives, new and existing programs and
services, prices and terms, customer service, integration processes, requirements and costs of
providing service, support and equipment; and all similar and related information in whatever form
or medium.

          (ii) Executive shall not disclose or use for his own account any of such Confidential
Information, except as reasonably necessary for the performance of his duties under this Agreement,
without the prior written consent of the Board, unless and to the extent that any Confidential
Information (i) becomes generally known to and available for use by the public other than as a
result of Executive’s breach or actions in violation of this Agreement or other improper acts or
omissions to act or otherwise (ii) is required to be disclosed pursuant to any applicable law or
court order, provided, however that, Executive must give Company prompt written notice of any such
legal requirement, disclose no more information than is so required and seek confidential treatment
where available, and cooperate fully with all efforts by the Company to obtain a protective order
or similar confidentiality treatment for such information. Upon the termination of Executive’s
employment hereunder, or at any other time the Company may request in writing, Executive agrees to
deliver to the Company all memoranda, notes, plans, records, reports, notebooks (and similar
repositories of or containing Confidential Information) and other documents (and all copies,
summaries and extracts thereof, in whatever form or medium) relating to the business or operations
of the Company or its subsidiaries or other affiliates or that otherwise constitute Confidential
Information, and at any time thereafter, if any such materials are brought to Executive’s attention
or Executive discovers them in his possession or control, Executive shall deliver such materials to
the Company immediately upon such notice or discovery

     (d) Inventions and Patents. If Executive creates, invents, designs, develops, contributes to
or improves any works of authorship, inventions, whether patentable or unpatentable and whether or
not reduced to practice, know-how, data, processes, methods, programs, systems, materials,
documents or other work product or other intellectual property, either alone or in conjunction with
third parties, at any time during Executive’s employment by or engagement with the Company
(“Works”), to the extent that such Works were created, invented, designed, developed,
contributed to, or improved with the use of any Company resources and/or within the scope of such
employment or engagement and/or relate to the business or operations, or actual or demonstrably
anticipated research or development, of the

8

 

Company or its subsidiaries or other affiliates (collectively, the “Company Works”),
Executive shall promptly and fully disclose such Company Works to the Company. Any copyrightable
work falling within the definition of Company Works shall be deemed a “work made for hire” as such
term is defined in 17 U.S.C. § 101. Executive hereby (i) irrevocably assigns, transfers and
conveys, to the extent permitted by applicable law, all right, title and interest in and to the
Company Works on a worldwide basis (including, without limitation, rights under patent, copyright,
trademark, trade secret, unfair competition and related laws) to the Company or such other entity
as the Company shall designate, to the extent ownership of any such rights does not automatically
vest in the Company under applicable law and (ii) waives any moral rights therein to the fullest
extent permitted under applicable law. Executive agrees that he will not use any Company Works for
his personal benefit, the benefit of a competitor, or for the benefit of any other person or entity
other than the Company. Executive agrees to execute any further documents and take any further
actions requested by the Company to assist it in validating, effectuating, maintaining, protecting,
enforcing, perfecting, recording, patenting or registering any of its rights hereunder.

     (e) Enforcement. The parties to this Agreement hereby agree and stipulate that (i) the
restrictions contained in this Agreement are reasonable and necessary in order to protect the
Company’s and its subsidiaries’ legitimate business interests and (ii) in the event of any breach
or violation of this Agreement or of any provision hereof by Executive, the Company and its
subsidiaries will have no adequate remedy at law and will suffer irreparable loss and damage
thereby. The parties hereby further agree and stipulate that in the event of any such breach or
violation, either threatened or actual, the Company’s and its subsidiaries’ rights shall include,
in addition to any and all other rights available to the Company and its subsidiaries at law or in
equity, the right to seek and obtain any and all injunctive relief or restraining orders available
to it in courts of proper jurisdiction, so as to prohibit, bar, and restrain any and all such
breaches or violations by Executive. The prevailing party to any legal action, arbitration or
other proceeding commenced in connection with enforcing any provision of this Section 5, including
without limitation, obtaining the injunctive relief provided by this Section 5 shall be entitled to
recover all court costs, reasonable attorneys’ fees, and related expenses incurred by such party.
Executive further agrees that no bond need be filed in connection with any request by the Company
and its subsidiaries for a temporary restraining order or for temporary or preliminary injunctive
relief.

     (f) Additional Acknowledgments. Executive acknowledges that the provisions of this Section 5
are in consideration of: (i) employment with the Company, (ii) the issuance of certain limited
liability company interests of V.G.A.T. Investors, LLC to the Executive and (iii) additional good
and valuable consideration as set forth in this Agreement. In addition, Executive acknowledges (i)
that the business of the Company and its subsidiaries is international in scope and without
geographical limitation and (ii) notwithstanding the state of incorporation or principal office of
the Company or any of its subsidiaries, or any of their respective executives or employees
(including the Executive), it is expected that the Company will have business activities and have
valuable business relationships within its industry throughout the world. Executive acknowledges
that he has carefully read this Agreement and has given careful consideration to the restraints
imposed upon Executive by this Agreement, and is in full accord as to their necessity for the
reasonable and proper protection of confidential and proprietary information of the Company and its
subsidiaries now existing or to be developed in

9

 

the future. Executive expressly acknowledges and agrees that each and every restraint imposed
by this Agreement is reasonable with respect to subject matter, time period and geographical area.

6. Successors.

     (a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

     (b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

     7. Miscellaneous.

     (a) This Agreement and any dispute, disagreement, or issue of construction or interpretation
arising hereunder whether relating to its execution, its validity, the obligations provided therein
or performance shall be governed or interpreted according to the internal laws of the State of New
York applicable to contracts entered into and to be performed solely within such State without
regard to choice of law considerations. The parties hereto hereby waive, to the fullest extent by
applicable law, any right to trial by jury with respect to any action or proceeding arising out of
or relating to this Agreement.

     (b) Any disputes with regard to this Agreement that is not resolved by mutual agreement, other
than as provided in Section 5(e) hereof, shall be resolved by binding arbitration before the
American Arbitration Association (“AAA”) in New York City pursuant to the rules of AAA.
The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§1-16 and shall
be conducted in accordance with the rules and procedures of AAA. Any judgment upon the reward
rendered by the arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator’s decision shall set forth a reasoned basis for any award of damages or findings of
liability. The arbitrator shall not have the power to award damages in excess of actual
compensatory damages and shall not multiply actual damages or award punitive damages, and each
party hereby irrevocable waives any claim to such damages. The costs of AAA and the arbitrator
shall be borne by the Company. Each party shall bear its own costs (including, without limitation,
legal fees and fees of any experts) and out-of-pocket expenses.

     (c) all notices, demands or other communications to be given or delivered under or by reason
of the provisions of this Agreement will be in writing and will be deemed to have been given when
delivered personally, mailed by certified or registered mail, return receipt requested and postage
prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the
recipient with telephonic confirmation by the sending party. Such notices, demands and other
communications will be sent to the address indicated below:

10

 

If to the Executive:

Paul R. Keen

22775 Shaker Blvd.

Shaker Heights, OH 44122-2655

If to the Company:

Argo-Tech Corporation

c/o Vestar Capital Partners IV, L.P.

245 Park Avenue, 41st Floor

New York, New York 10167

Telecopy: (212) 808 4922

Attention: John Woodard

                   General Counsel

and

c/o Greenbriar Equity Group LLC

555 Theodore Fremd Avenue

Rye, New York 10580

Telecopy: (914) 925-9699

Attention: Reginald L. Jones

                   John Daileader

with a copies (which shall not constitute notice to the Company) to:

Kirkland & Ellis LLP

Citigroup Center

153 East 53rd Street

New York, NY 10022

Telecopy: (212) 446-4900

Attention: Michael Movsovich, Esq.

                   Christopher Neumann, Esq.

or such other address or to the attention of such other person as the recipient party shall have
specified by prior written notice to the sending party. Any notice under this Agreement shall be
deemed to have been given when so delivered, sent or mailed.

     (d) Subject to the provisions of Section 4(c), there shall be no limitation on the ability of
the Company to terminate the Executive at any time with or without Cause.

11

 

     (e) Whenever possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this Agreement is held to
be invalid, illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never been contained
herein.

     (f) The captions of this Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and legal representatives.

     (g) The Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or
regulation.

     (h) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder shall not be deemed to be a waiver of such provision or right or any other provision
or right of this Agreement.

     (i) From and after the Effective Date this Agreement shall supersede any other employment
agreement between the parties with respect to the subject matter hereof.

* * * * * * * * *

12

 

     IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents to be executed in
its name on its behalf, all as of the day and year first above written.

 

	 	 	 	 	 	 
	 	 	/s/ Paul R. Keen
	 	 	 
	 	 	PAUL R. KEEN
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	ARGO-TECH CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	/s/ Michael S. Lipscomb 
	 

	 	 	 	 
	 

	 	Title:	 	President
	 

	 	 	 	 

13

 

Exhibit A

FORM OF RELEASE AGREEMENT

     In consideration of receipt of severance payments and benefits as set forth in Section 4 of
the Employment Agreement, dated as of October ___, 2005, by and between Argo-Tech Corporation (the
“Company”) and Paul R. Keen (the “Employment Agreement”), I, Paul R. Keen, hereby
release and discharge the Company, and each of its employees, officers, directors, stockholders,
agents, subsidiaries and other affiliates from, and waive any and all claims, demands, damages,
causes of action or suits (collectively, “Claims”) of any kind or nature whatsoever that I
may have had or may now have against any of them (including, without limitation, any Claims arising
out of or related to my employment with the Company or the termination thereof), whether arising
under contract, tort, statute or otherwise, and whether I know of the claim or not, including,
without limitation, Claims arising under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the Equal Pay for Equal Work
Act, and any other applicable federal, state or local statutes, rules, codes, or ordinances.
Notwithstanding anything herein to the contrary this release does not cover (i) my rights to the
severance payments and benefits provided in Section 4 of the Employment Agreement; (ii) my rights
to any vested or accrued benefits or rights under the applicable terms of Company plans, programs,
or arrangements; (iii) any Claim by me to enforce the rights arising under or preserved by the
Employment Agreement that survive expressly survive termination of my employment; (iv) any Claim by
me to enforce indemnification rights as provided in the Company’s articles of incorporation; and
(v) my rights in my capacity as an equity holder of V.G.A.T. Investors, LLC and/or AT Holdings
Corporation unless such right is terminated by its terms due to the termination of my employment
with the Company.

     I have not, and shall not hereafter, institute any lawsuit of any kind whatsoever, or file any
complaint or charge, against the Company or any of its former or present employees, officers,
directors, stockholders, agents, subsidiaries, or affiliates, and any of their successors or
assigns, under any federal, state or local statute, rule, regulation or principle of common law
growing out of events released hereunder. I shall not seek employment or reemployment with the
Company. I acknowledge that I have had at least 21 days to review and consider this release
agreement before accepting it. I have been advised to consult with an attorney before signing this
release agreement.

     This release agreement and any dispute, disagreement, or issue of construction or
interpretation arising hereunder whether relating to its execution, its validity, the obligations
provided therein or performance shall be governed or interpreted according to the internal laws of
the State of New York applicable to contracts entered into and to be performed solely within such
State without regard to choice of law considerations. The parties hereto hereby waive, to the
fullest extent by applicable law, any right to trial by jury with respect to any action or
proceeding arising out of or relating to this Agreement.

14

 

	 	 	 	 	 	 
	 	 	 
	 	 	Paul R. Keen
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Dated:	 	 
	 

	 	 	 	 

     Acknowledged and Agreed as of

     ____________, ___:

ARGO-TECH CORPORATION

	 	 	 	 
	By:
	 	 
	 

	 	 
	 

	 	Name:

Title:

15

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