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.
(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.
1
(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.
(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
2
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;
3
(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.
4
(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;
5
(iii) to
the extent not theretofore paid or provided, the Compan
|
