Document:

EX-10.3   EMPLOYMENT AGREEMENT

 

Exhibit 10.3

EMPLOYMENT AGREEMENT

     THIS AGREEMENT, is made and entered into as of December 1, 1993 by and among Graham
Manufacturing Co., Inc., a New York corporation with offices at 20 Florence Avenue, Batavia, New
York 14020 (“GMC”), Graham Corporation, a Delaware corporation with offices at 20 Florence Avenue,
Batavia, New York 14020 (“Holding Company”) and James R. Lines, currently residing at 11 Hillside
Parkway, Lancaster, New York 14086 (the “Executive”).

     The parties hereto, intending to be legally bound hereby, and in consideration of the mutual
covenants herein contained, agree as follows:

     1. Employment.

     GMC hereby employs the Executive and the Executive hereby accepts employment (such employment,
hereafter, the “Employment”) as Vice President of Marketing in charge of the Application and
Computer Engineering Departments of GMC upon the terms and conditions hereinafter set forth.
Failure in any year of the Board of Directors of GMC (“GMC Board”) at its Annual Meeting to elect
the Executive to the office of Vice President of Marketing shall constitute termination of the
Executive’s employment without cause for purposes of this Agreement.

     2. Duties. The Executive is engaged as Vice President of Marketing of GMC. The
Executive shall have authority and responsibility for the operation and management, on a day to day
basis, of the Application and Computer Engineering Departments of GMC, and shall perform such
duties consistent with Executive’s title as may from time to time be required of Executive by the
GMC Board or by either the Chairman and Chief Executive Officer or the President of GMC, to whom
Executive shall be directly responsible. The Executive’s office shall be at GMC’s headquarters
office in Batavia, New York, or within a reasonable commuting distance thereof. The Executive
agrees to travel to the extent reasonably necessary for the performance of his duties hereunder.
The Executive shall devote his full business time to the business and affairs of GMC and shall use
his best efforts, skill and ability in performing his duties on behalf of GMC.

     3. Term.

          (a) Except as otherwise provided in this Agreement to the contrary, the terms and conditions
of this Agreement shall be and remain in effect during the period of employment (“Term”)
established under this Section 3. The Term shall be for a term of one (1) year commencing on
December I, 1993, plus such extensions, if any, as are provided pursuant to Section 3(b).

          (b) Except as provided in Section 3(c), beginning on the date of this Agreement, the Term
shall be automatically extended for one (1) additional day each day, unless either GMC or the
Executive elects not to extend the Term further by giving written notice to the other party, in
which case the Term shall end on the first anniversary of the date on which such written notice is
given; provided, however, that in any event, the Term shall end on the last day of the month in
which the Executive attains age sixty-five (65). Upon termination of the Executive’s employment
with GMC for any reason whatsoever, any daily extensions provided pursuant to this Section 3, if
not theretofore discontinued, shall cease and the remaining unexpired Term under this Agreement
shall

 

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be a fixed period ending on the first anniversary of the date on which the daily extensions
were discontinued.

          (c) Notwithstanding anything herein contained to the contrary: (i) the Executive’s employment
with GMC may be terminated during the Term, subject to the terms and conditions of this Agreement;
and (ii) nothing in this Agreement shall mandate or prohibit a continuation of the Executive’s
employment following the expiration of the Term upon such terms and conditions as GMC and the
Executive may mutually agree upon.

     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 $85,000 per annum, payable in arrears in equal
monthly installments, subject to such deductions and withholdings as may be required by law. Upon
cessation by GMC of the five percent wage reduction in effect as of the date hereof, the
Executive’s salary shall be increased by five percent (5%). During the fourth quarter of each year
commencing in calendar year 1994, 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 or to continue any such increase. However, in the event that any person or entity
acquires twenty percent (20%) or more of the outstanding equity stock of GMC’s parent, 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 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 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, and provided that in such event, such person or entity (i) initiated a
tender offer for the capital stock of the Company or GMC other than at the invitation of either the
Holding Company Board or the GMC Board; or (ii) caused its nominee or nominees to be elected to the
Holding Company Board or the GMC Board as a result of a proxy contest in which election of its
nominees, or any of them, was not endorsed by management of the Holding Company or GMC in any proxy
statement prepared for the purpose; or (iii) acquired its twenty percent or greater interest in
either the Holding Company or GMC subsequent to and within two years of any other party or entity’s
initiation of a tender offer, initiation of a proxy contest, or offer to acquire all, or more than
20% of the outstanding capital stock of the Holding Company or GMC for a stated price or in
exchange for any non-cash form of consideration 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.

 

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     5. Bonuses. GMC shall pay Executive bonuses subject to The Executive Bonus Plan of
Graham Corporation, as it may be amended from time to time, or such other bonus plans or
arrangements of GMC, or made available to GMC by the Holding Company, as may be in effect from time
to time, as determined by GMC’s Board of Directors or a committee thereof.

     6. Benefits. During the term of this Agreement, GMC shall provide the following
benefits to the Executive:

          6.1 Medical. GMC will provide the Executive health coverage for himself and his family
in accordance with the Graham Manufacturing Co., Inc. Self Insured Medical/Dental Plan, as the
same may be amended from time to time, or in accordance with such other health coverage plan as GMC
may adopt.

          6.2 Vacation. The Executive shall be entitled to paid vacation in accordance with
GMC’s vacation policy, as the same may be in effect from time to time.

          6.3 Relocation. GMC will pay the executive $5,000 for relocation costs in connection
with the sale of the Executive’s residence at 11 Hillside Parkway, Lancaster, New York.

          6.4 General Benefits. The Executive shall be entitled to participate in all employee
benefit plans and arrangements of the Holding Company and GMC that may from time to time be in
effect and may from time to time be made available to the executive officers of GMC, subject to and
on a basis consistent with the terms, conditions and overall administration of such plans and
arrangements. Nothing in this Section 6.4 shall be construed to limit or restrict the complete
discretion of the Board of Directors of the Holding Company or, as the case may be, the Board of
Directors of GMC, to amend, modify or terminate employee benefit or bonus plan or plans of the
Holding Company or GMC where such action generally affects plan participants or employees,
including the Executive.

          6.5 Life Insurance. (a) GMC will provide life insurance for the executive providing
coverage in an amount equal to three times base salary. (b) The Executive agrees that GMC, in its
discretion, may apply for and procure in its own name and for its own benefit, life insurance on
his life in any amount or amounts considered advisable, and that he shall have no right, title or
interest therein. The employee further agrees to submit to any medical or other examination and to
execute and deliver any application or other instrument in writing, reasonably necessary to
effectuate such insurance, provided such actions do not harm the Executive’s ability to otherwise
obtain or retain life insurance(s). (c) As soon as practical following the termination of
employment for any reason except for cause, GMC will cause to be transferred, assigned or otherwise
conveyed to the Executive any right, title and interest that either may have in and to any life
insurance contract (other than any group-term life insurance contract) under which the Executive’s
life is insured, including full rights of ownership in and to the cash surrender value thereof (net
of any loans obtained against such cash surrender value), and the Executive shall assume all
obligations for the payment of any premiums which may become due with respect to such insurance
contract after the termination of employment.

     7. Use of Automobile.

 

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          7.1 GMC shall, at its expense, provide the Executive with an automobile of the Executive’s
choice for use by the Executive in performance of his duties under this Agreement, provided that
the annual lease payments made by GMC on such automobile shall not exceed in any year seven percent
(7%) of the Executive’s annual base salary for such year. GMC shall pay or reimburse the Executive
for all reasonable and necessary expenses of maintenance and operation of such automobile incurred
or paid for by the Executive, and shall obtain, and include the name of the Executive as one of the
assureds under, a liability insurance policy for injuries to persons and property caused by the
operation of such automobile. At the end of the term of any automobile lease entered into by GMC
pursuant to this Section 7.1, GMC may, in its discretion, either (a) lease a new automobile for the
Executive’s use; or (b) provide the Executive with the continued use of the same automobile, at
GMC’s expense. In the event GMC elects to do neither, GMC shall permit the Executive to purchase
the automobile from the lessor.

          7.2 Notwithstanding the provisions of Section 7.1 above, the Executive represents that he now
carries automobile liability insurance, with respect to any automobile owned by him, for injuries
to persons and property.

     8. Expenses. GMC shall pay or reimburse the Executive for all reasonable and necessary
traveling and other expenses incurred or paid by the Executive in connection with the performance
of his duties under this Agreement upon presentation of expense statements or vouchers and such
other supporting information as it may from time to time request. However, the amount available
for such traveling and other expenses may be fixed in advance by the Chairman, the President or the
Board of Directors of GMC.

     9. Termination. This Agreement shall terminate prior to the Term expiration date,
hereinabove set forth, in the event that the Executive shall die or GMC shall determine that the
Executive has become disabled, or if the Executive shall be dismissed for cause or without cause,
as hereinafter provided.

          9.1 Disability. GMC may determine that the Executive has become disabled, for purposes
of this Agreement, in the event that the Executive shall fail, because of illness or incapacity, to
render for nine (9) successive months, or for shorter periods aggregating twelve (12) months or
more in any period of eighteen (18) months, services of the character contemplated by this
Agreement; and thereupon this Agreement and the employment and all rights of the Executive
hereunder shall be deemed to have been terminated as of the end of the calendar month in which such
determination was made.

          9.2 For Cause. GMC may dismiss the Executive for cause in the event that it determines
that there has been willful misconduct by the Executive in connection with the performance of his
duties hereunder, or any other conduct on the part of the Executive which has been materially
injurious to GMC or any affiliate; and thereupon this Agreement and the Employment shall terminate
effective upon the delivery to the Executive of written notice that the GMC Board has made such
determination. For purposes of this Agreement, “Cause” shall be determined only by a good faith
finding thereof by the GMC Board, which shall afford the Executive the opportunity to appear before
it prior to finalizing any such determination. If the Executive in good faith contests a
termination for cause by GMC, GMC will pay all legal fees and other expenses incurred by the
Executive, as the Executive is billed for such costs, within ten (10) days of periodic

 

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submission to GMC of statements of charges of attorneys and statements of other expenses
incurred by the Executive in connection with such challenge; the Executive will reimburse GMC if it
should be determined by a court of final adjudication that the Executive did not act in good faith
in bringing such challenge.

          9.3 Without Cause. GMC may dismiss the Executive without cause at any time upon thirty
(30) days notice to the Executive. In the event GMC dismisses the Executive other than for cause,
or if the Executive resigns because of a material breach of this Agreement by GMC, GMC shall
thereupon pay to the Executive (a) the compensation due him to the date of termination, plus (b) an
additional lump sum in an amount equal to twelve months’ salary at the rate specified in Section 4
hereinabove. At any time prior to the effective date of termination of employment, the Executive
may in writing elect to receive the additional lump sum equal to twelve months’ salary in monthly
installments of up to, but not to exceed, thirty-six (36) successive months. In addition, GMC
shall (a) provide the Executive with continuing health care coverage, as described in Section 6.1
hereof, for a period of thirty-six (36) months following the effective date of termination of
employment; (b) shall pay for, or in the Executive’s sole discretion, reimburse the Executive as
the Executive is billed, within ten (10) days of periodic submission to GMC of statements of
charges, for outplacement services from a provider agreed to by the Executive and GMC until the
sooner of (i) the Executive’s commencement of employment with another employer or (ii) thirty-six
(36) months following the effective date of termination of employment; and (c) shall assign to the
Executive its interest in the automobile lease in force at the time of termination of employment
and shall reimburse the Executive for each remaining lease payment thereafter, within ten (10) days
of the due date of each remaining lease payment; or in the event that termination of employment
occurs following the expiration of such automobile lease and prior to GMC extending such lease or
leasing a new automobile for the Executive, GMC, if it then owns the automobile, shall, at the
election of the Executive, sell the automobile to the Executive for the value for such automobile
stated in the then-current edition of the NADA Official Used Car Guide for Domestic and Imported
Cars and Trucks. 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 all subsidiaries and affiliates of GMC and of the Holding Company, upon payment to
the Executive of the amounts referred to in the second sentence of this Section 9.3, and the
performance by GMC of its obligations pursuant to the fourth sentence, subsections (c) and (d), of
this Section 9.3.

          9.4 Return of Confidential Documentation. Upon termination of employment for any
reason whatsoever, the Executive shall return to GMC all working papers, notebooks, strategic
plans, computer programs and files, and other confidential documents and information, in any form
whatsoever.

     10. Covenants of Executive.

          The Executive acknowledges that: (a) the business of GMC and its affiliates, as currently
conducted and as conducted from time to time throughout the term of this Agreement (collectively,
the “Business”), is conducted by and is proposed to be conducted on a world wide basis (the
“Company’s Market”); (b) the Business involves providing design, engineering and manufacture of
certain vacuum and heat transfer equipment, including but not limited to steam condensers, steam
jet ejectors, shell and tube heat exchangers, plate and frame heat exchangers, Heliflow heat
exchangers, liquid ring vacuum pumps and rotary piston pumps; (c) GMC has

 

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developed trade secrets and confidential information concerning the Business; and (d) the
agreements and covenants contained in this Section 10 are essential to protect the Business of GMC.
In order to induce GMC to enter into this Employment Agreement, the Executive covenants and agrees
that:

          10.1 Agreement Not To Compete. In the event that the Executive resigns (for reasons
other than a material breach of this Agreement by GMC) or departs from the employ of GMC without
the approval of the GMC Board or is discharged for cause, then for a period of twelve (12) months
after such resignation, departure or discharge (such period of time hereinafter the “Restricted
Period”), neither the Executive nor any entity of which 20% or more of the beneficial ownership is
held by the Executive or a person related to the Executive by blood or marriage (“Controlled
Entity”) will, anywhere in the Company’s Market, directly or indirectly own, manage, operate,
control, invest or acquire an interest in, or herewise engage or participate in, whether as a
proprietor, partner, stockholder, director, officer or employee, any business which competes in the
Company’s Market with the Business, without the prior written consent of GMC. Notwithstanding any
other provisions of this Agreement, the Executive may make a passive investment in any
publicly-traded company or entity in an amount not to exceed 5% of the voting stock of any such
company or entity.

          10.2 Agreement Not To Interfere in Business Relationships. (a) During the Restricted
Period, neither the Executive nor any Controlled Entity will directly or indirectly solicit, induce
or influence customer, or any other person which has a business relationship with GMC or any
affiliate, or which had on the date of this Agreement such a relationship with GMC or any
affiliate, to discontinue or reduce the extent of such relationship with GMC or any affiliate in
the Company’s Market without the prior written consent of GMC. (b) During the Restricted Period,
neither the Executive nor any Controlled Entity will (i) directly or indirectly recruit, solicit or
otherwise induce or influence any shareholder or employee of GMC or any of its affiliates to
discontinue such employment or other relationship with GMC or any affiliate without the prior
written consent of GMC, or (ii) employ or seek to employ, or cause or permit any Competitive
Business which competes in the Company’s Markets to employ or seek to employ for any Competitive
Business, any person who is then (or was at any time within six months prior to the date the
Executive or the Competitive Business employs or seeks to employ such person) employed by GMC or
any affiliate without the prior written consent of GMC. Nothing herein shall prevent the Executive
from providing a letter of recommendation to an Employee with respect to a future employment
opportunity, nor prohibit the Executive from making general employment advertisements in
mass-circulation newspapers or other mass media.

          10.3 Confidentiality. During the Restricted Period, neither the Executive nor any
Controlled Entity will directly or indirectly disclose to anyone, or use or otherwise exploit for
the Executive’s or any Controlled Entity’s own benefit or for the benefit of anyone other than GMC,
any confidential information, including, without limitation, any confidential “know-how”, trade
secrets, customer lists, details of customer contracts, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans, business acquisition plans
and new personnel acquisition plans of GMC or any affiliate related to the Business or any portion
or phase of any scientific, engineering or technical information, design, process, procedure,
formula, improvement, discovery, invention, machinery or device of GMC or any affiliate that is not
generally known to the competitors of the Company whether or not in written or tangible form
(hereinafter referred to as

 

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“Confidential Information”). The term “Confidential Information” does not include, and there
shall be no obligation hereunder with respect to, information that becomes generally available to
the public other than as a result of a disclosure by the Executive or a Controlled Entity or any
agent or other representative thereof. Neither the Executive nor any Controlled Entity shall have
any obligation hereunder to keep confidential any Confidential Information to the extent disclosure
is required by law, or determined in good faith by the Executive to be necessary or appropriate to
comply with any legal or regulatory order, regulation or requirement; provided, however, that in
the event disclosure is required by law, the Executive or the Controlled Entity concerned shall
provide the Company with prompt notice of such requirement so that GMC may seek an appropriate
protective order. It is understood that in any new employment, the Executive may use his ordinary
skill and non-confidential knowledge, even though said skill and non-confidential knowledge may
have been gained at GMC. The Executive’s obligations under this Section 10.3 shall be in addition
to, not in substitution for, any common law fiduciary duties the Executive has to GMC regarding
information acquired during the course of his employment.

10.4 Intellectual Property. The Executive shall communicate to GMC full information
concerning all inventions, improvements, discoveries, formulas, processes, systems of organization,
management procedures, software or computer applications (hereinafter, collectively, “Intellectual
Property”) made or conceived by him either solely or jointly with others while in the employ of
GMC, whether or not perfected during his period of employment and which shall be within the
existing or contemplated scope of the Business during his employment. The Executive will assist GMC
and its nominees in every way at GMC’s expense in obtaining patents for such Intellectual Property
as may be patentable in any and all countries and the Executive will execute all papers GMC may
desire and assignments thereof to GMC or its nominees and said Intellectual Property shall be and
remain the property of GMC and its nominees, if any, whether patented or not or assigned or not.

10.5 Survival of Covenants. In the event of a termination of this Agreement, the
covenants and agreements contained in this Section 10 shall survive, shall continue thereafter, and
shall not expire unless and except as expressly set forth in such Section.

10.6 Remedies. The parties to this Agreement agree that (a) if either the Executive or
any Controlled Entity breaches any provision of this Section 10, the damage to GMC and its
affiliates will be substantial, although difficult to ascertain, and money damages will not afford
an adequate remedy, and (b) if either the Executive or any Controlled Entity is in breach of this
Agreement, or threatens a breach of this Agreement, GMC shall be entitled in its own right and/or
on behalf of one or more of its affiliates, in addition to all other rights and remedies as may be
available at law or in equity, to (i) injunctive and other equitable relief to prevent or restrain
a breach of this Agreement and (ii) may require the breaching party to pay damages as the result of
any transactions constituting a breach hereof.

     11. Indemnification of Executive. In the event the Employment is terminated for any
reason, (a) GMC will hold harmless and indemnify the Executive for all acts or omissions and for
any suits it has at law or in equity, claims, actions or other proceedings against the Executive
initiated either prior to the termination of employment or thereafter which relate to duties
performed in good faith by the Executive while employed by GMC; and (b) the Company will retain the
Executive as named insured under any directors’ and officers’ insurance policies it may have, for

 

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acts of the Executive during the time he served as an officer of the Company and GMC.
Additionally, all legal and other costs incurred by the Executive to defend himself will be paid by
GMC, as the Executive is billed for such costs, within ten (10) days of periodic submission to GMC
of statements of charges of attorneys and statements of other expenses incurred by the Executive in
connection with such defense.

     12. Effect of Waiver. The waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed as a waiver of any subsequent breach thereof.

     13. Notice. Any and all notices provided for herein shall be in writing and shall be
physically delivered or mailed by registered or certified mail, return receipt requested to the
parties at their respective addresses set forth hereinabove. Either party may from time to time
designate a different address for notices to be sent to such party by giving the other party due
notice of such different address.

     14. Validity. If any part of this Agreement shall be found to be invalid or
unenforceable, the same shall be deemed to be severable and the remaining portions of this
Agreement shall remain in full force and effect.

     15. Modification and Assignment. This Agreement shall not be modified or amended
except by an instrument in writing signed by the parties hereto. This Agreement and all of its
terms and conditions shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors and assigns, including but not limited to
any corporation or other entity with or into which GMC is merged or consolidated or any other
successor of GMC. The Executive agrees that he will not and may not assign, transfer or convey,
pledge or encumber this Agreement or his right, title or interest therein, or his power to execute
the same or any monies due or to become due hereunder, this Agreement being intended to secure the
personal services of the Executive, and GMC shall not recognize any such assignment, transfer,
conveyance, pledge or encumbrance.

     16. Applicable Law. This agreement and the rights and obligations of the parties
hereunder shall be construed and interpreted in accordance with the laws of the State of New York,
without giving effect to the conflict of laws provisions thereof.

     17. Prior Agreements. This Agreement shall supersede any prior employment agreement
between the Company and the Executive and shall be effective from the date specified hereinabove.

     18. Business Combinations. In the event of any sale, merger or any form of business
combination affecting the Holding Company or GMC whatsoever, the Holding Company and GMC will
obtain the express written assumption of this Agreement by the acquiring or surviving entity from
such combination, and failure of the Holding Company and GMC to obtain such an assumption will
constitute a breach of this Agreement, entitling the Executive to all payments and other benefits
to be provided in the event of termination without cause provided in Section 9.3 hereof.

     19. Headings. The section headings of this Agreement are for convenience of reference
only and are not to be considered in the interpretation of the terms and conditions of this
Agreement.

 

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     20. Invalidity or Unenforceability. If any term or provision of this Agreement is held
to be invalid or unenforceable, for any reason, such invalidity or unenforceability shall not
affect any other term or provision hereof and this Agreement shall continue in full force and
effect as if such invalid or unenforceable term or provision (to the extent of the invalidity or
unenforceability) had not been contained herein. If any court determines that any provision of
Section 10 hereof is unenforceable because of the duration or geographic scope of such provision,
such court shall have the power to reduce the scope or duration of such provision, as the case may
be, and, in its reduced form, such provision shall then be enforceable.

     21. Counterparts. This agreement may be executed in any number of counterparts, each
of which for all purposes shall be deemed to be an original.

     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:
	 	 	 	 
	 

	 	 

	 	 

 

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	STATE OF NEW YORK

	 	 ) 
	 

	 	 : ss.:
	COUNTY OF GENESEE

	 	 )

     On the 10th day of July, 1995, 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

	 	 	 
	STATE OF NEW YORK

	 	 )
	 

	 	 : ss.:
	COUNTY OF GENESEE

	 	 )

     On the 10th day of July, 1995, 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 10th day of July, 1995, 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 PublicEX-10.6  AMENDMENT NO 1 TO EMPLOYMENT AGREEMENT

 

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

 

-3-

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

 

-4-

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

 

-5-

	 	 	 
	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

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