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Exhibit 10.5
GRAHAM CORPORATION
SENIOR EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT between Graham Corporation, a Delaware corporation (the
"Corporation"), and Alvaro Cadena (the "Executive"), WITNESSETH:
WHEREAS, the Board of Directors (the "Board") of the Corporation has
approved the Corporation entering into severance agreements with persons
designated key executives of the Corporation or its Subsidiaries;
WHEREAS, the Executive has been designated as a key executive of the
Corporation or one of its Subsidiaries by the Board to be a party to this
Agreement; and
WHEREAS, should the Corporation receive any proposal from a person
concerning any possible business combination with, or acquisition of equity
securities of, the Corporation, the Board believes it imperative that the
Corporation and the Board be able to rely upon the Executive to continue in his
position, and that the Corporation be able to receive and rely upon his advice,
if it requests it, as to the best interests of the Corporation and its
shareholders without concern that he might be distracted by the personal
uncertainties and risks created by such a proposal; and
WHEREAS, should the Corporation receive any such proposals, in addition to
the Executive's regular duties, he may be called upon to assist in the
assessment of such proposals, to advise management and the Board as to whether
such proposals would be in the best interests
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of the Corporation and its shareholders, and to take such other actions as the
Board might determine to be appropriate;
NOW, THEREFORE, to assure the Corporation that it will have the continued
dedication of the Executive and the availability of his advice and counsel
notwithstanding the possibility, threat or occurrence of a bid to take over
control of the Corporation, and to induce the Executive to remain in the employ
of the Corporation, and for other good and valuable consideration, the
Corporation and the Executive agree as follows:
I. SERVICES DURING CERTAIN EVENTS. In the event a person begins a tender or
exchange offer, circulates a proxy to shareholders, or takes other steps seeking
to effect a Change in Control (as hereinafter defined), the Executive agrees
that he will not voluntarily leave the employ of the Corporation, and will
render the services contemplated in the recitals to this Agreement, until the
person has abandoned or terminated his or its efforts to effect a Change in
Control or until three months after a Change in Control has occurred.
II. TERMINATION AFTER CHANGE IN CONTROL. In the event of a Termination (as
hereinafter defined) of the Executive's employment with the Corporation
(including its Subsidiaries) either (a) within three years after a Change in
Control of the Corporation; or (b) in any of the situations described in
Sections III.G. (ii), III.G. (iii) or III.G. (iv) of this Agreement:
A. LUMP SUM CASH PAYMENT. On or before the Executive's last day of
employment with the Corporation, the Corporation will pay to the
Executive as compensation for services rendered to the Corporation a
lump sum (subject to any applicable payroll or other taxes required to
be withheld) in an amount equal to (i)
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one dollar less than three times the Executive's annualized
tax-includable compensation, including bonus compensation, for the five
most recent taxable years ending before the date of the Change in
Control; or (ii) if the Executive was employed by the Corporation for
less than five years, one dollar less than three times the Executive's
annualized tax includable compensation including bonus compensation for
the period during which the individual was continuously employed by the
Corporation and ending on the date of the Change in Control of the
Corporation. In the event the Executive dies at any time prior to
receiving the lump sum payment but following the occurrence of any
event requiring the Corporation to pay it under the terms of this
Agreement, the payments provided for by this paragraph shall be paid to
the Executive's estate.
B. MONTHLY CASH PAYMENT. (i) At any time prior to the close of business
on the Executive's last day of employment with the Corporation, the
Executive may in writing elect to receive, instead of the lump sum cash
payment provided in Section II.A., consecutive monthly cash payments of
a number to be specified by the Executive but not to exceed 36. In the
event of such election, the Corporation will pay to the Executive as
compensation for services rendered to the Corporation equal consecutive
monthly cash payments (subject to any applicable payroll or other taxes
required to be withheld) of the number specified by the Executive, such
that the sum of the present value on the date of Termination of these
payments in the aggregate, as determined pursuant to Section B. (ii),
is equal to the amount
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specified by either Section II.A. (i) if the Executive has been
employed by the Corporation for five years or more, or Section II.A.
(ii) if the Executive has been employed by the Corporation for less
than five years. The Corporation will pay the Executive the first of
such payments on or before the Executive's last day of employment with
the Corporation, and will pay the remaining payments on the first day
of each succeeding month until the number of payments specified by the
Executive has been paid. In the event the Executive dies at any time
prior to receiving all of the monthly payments in the number specified
by the Executive but following the occurrence of any event requiring
the Corporation to pay them under the terms of this Agreement, the
payments provided for by this paragraph shall be paid to the
Executive's estate. (ii) The present value of the amount payable under
this section II.B. shall be determined using the interest rate
prescribed by the Internal Revenue Code of 1986, as amended, (the
"Code") Section 1274(b)(2) and applicable regulations and the method
prescribed by Code Section 280G(d)(4) and regulations.
C. OTHER PROVISIONS.
(1) BONUS COMPENSATION. Any awards previously made to the
Executive as bonus compensation and not previously paid shall
immediately vest on the date of his Termination and shall be paid on
that date. If the Executive's Termination date and the date of Change
in Control are the same, then the bonus payment made on the date of
termination shall be included as compensation in the month when
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paid, for the purpose of determining the Executive's five-year
annualized tax-includable compensation as provided in paragraph II(A)
herein.
(2) SAVINGS AND OTHER PLANS. The Executive's participation in any
applicable savings and/or profit sharing plan of the Corporation or any
of its subsidiaries, and any terminating distributions and/or vested
rights under such plans shall be governed by the terms of those
respective plans.
(3) STOCK INCENTIVE PLAN; STOCK OPTION AND STOCK APPRECIATION
RIGHTS. Upon Termination of the Executive's employment the Corporation
agrees to accelerate and make immediately exercisable in full all
unmatured installments of all options which the Executive then holds to
acquire securities. Such options shall be exercisable by the Executive
in accordance with their terms.
(4) RETIREMENT BENEFITS. (a) The Executive shall be entitled to
the total retirement benefits actually payable to him or his
beneficiaries under the Corporation's retirement plans or any successor
plans of the Corporation, and in the amount and manner prescribed by
such plans.
(b) Upon Termination of the Executive's employment with the
Corporation following a Change in Control, the Corporation shall
pay and provide to the Executive (or, in the event of his death,
to his estate) within twenty (20) days following his termination
of employment with the Corporation, a lump sum payment in an
amount equal to the excess, if any, of:
(i) the present value of the aggregate benefits to
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which he would be entitled under any and all qualified and
non-qualified defined benefit pension plans maintained by,
or covering employees of, the Corporation if he were 100%
vested thereunder, such benefits to be determined as of the
date of termination of employment; over
(ii) the present value of the benefits to which he is
actually entitled under such defined benefit pension plans
as of the date of his termination;
where such present values are to be determined using the mortality
tables prescribed under section 415(b)(2)(E)(v) of the Code and a
discount rate, compounded monthly, equal to the annualized rate of
interest prescribed under section 415 of the Code for the valuation of
lump sum payments for the month in which the Executive's termination
of employment occurs; provided, however, that if the Executive so
requests by notifying the Corporation prior to the close of business
on the Executive's last day of employment with the Corporation, the
above payment will be made in equal monthly cash payments of a number
to be specified by the Executive (but not to exceed thirty-six (36)),
and the present value of such monthly payments will equal the above
lump sum amount.
D. OTHER EMPLOYMENT. The Executive shall not be obligated to seek
other employment in mitigation of the amounts payable or arrangements
made under any
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provision of this Agreement, nor shall any payments under this
Agreement be reduced on account of any compensation, benefits or
service credits for benefits from any employment that the Executive
may obtain following his Termination.
E. DEFINITIONS.
(1) "CHANGE IN CONTROL". For the purposes of this Agreement, a "Change
in Control" shall be deemed to have taken place if:
(a) as the result of, or in connection with, any cash tender or
exchange offer, consolidation, merger or other business
combination, sale of assets or contested election or elections,
or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of the Corporation
before the Transaction shall cease for any reason to constitute a
majority of the Board of Directors of the Corporation or any
successor to the Corporation (including any entity acquiring
substantially all the assets of the Corporation); OR
(b) a "person" (as that term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act") as in effect on the date hereof), including a "group" as
defined in Section 13(d)(3) of the Exchange Act, becomes the
beneficial owner, directly or indirectly, of shares of the
Corporation having 25% or more of the total number of votes that
may be cast for the election of Directors of the Corporation; OR
(c) any event occurs with respect to the Corporation that would
be required
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to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A, or to Item 1 of Form 8-K, under the Securities
Exchange Act of 1934, as amended.
(2) "TERMINATION". For the purposes of this Agreement, the term
"Termination" shall mean termination by the Corporation of the employment
of the Executive with the Corporation (including its subsidiaries) for any
reason other than death, disability or cause (as defined below), or
resignation of the Executive upon the occurrence of either of the following
events:
(a) A change in the nature or scope of the Executive's authority
from that prior to a Change in Control, a reduction in the
Executive's total compensation (including all and any base
compensation, bonuses, incentive compensation and benefits of any
kind or nature whatsoever and including but not limited to the
benefits referred to in Paragraph C of this Section II) from that
prior to a Change in Control, or failure of the Corporation to
make any increase in compensation to which the Executive may be
entitled under any employment agreement, or a change requiring
the Executive to perform services other than in Batavia, New York
or in any location more than thirty miles distant from Rochester,
New York by road, except for required travel on the Corporation's
business to an extent substantially consistent with the
Executive's present business travel obligations; or
(b) A reasonable determination (as defined below) by the
Executive
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that, as a result of a Change in Control and a change in
circumstances thereafter significantly affecting his position, he
is unable to exercise the authority, powers, function or duties
attached to his position.
(3) "CAUSE". The term "cause" means fraud, misappropriation or
intentional material damage to the property or business of the
Corporation or commission of a felony.
(4) "DISABILITY" The term "disability" means the Executive's absence
from his duties with the Corporation on a full time basis for 6
successive months, or for shorter periods aggregating 7 months or more
in any year, as a result of the Executive's incapacity due to physical
or mental illness, unless within 30 days after the Corporation gives
written notice of termination following such absence the Executive
shall have returned to the full time performance of his duties.
(5) "REASONABLE DETERMINATION". Termination of employment by the
Executive in his "reasonable determination" shall mean termination
based on:
(a) subsequent to a Change in Control of the Corporation, and
without the Executive's express written consent, the assignment
to him of any duties inconsistent with his positions, duties,
responsibilities and status with the Corporation immediately
prior to a Change in Control, or a change in the Executive's
reporting responsibilities, titles, or offices as in effect
immediately prior to a Change in Control, or any removal of the
Executive from or any failure to re-elect him to any of such
positions, except in
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connection with the termination of his employment for cause,
Disability or Retirement or as a result of his death or by the
Executive other than in a Reasonable Determination; or
(b) subsequent to a Change in Control of the Corporation, a
reduction by the Corporation in the Executive's base salary as in
effect on the date hereof or as the same may be increased from
time to time, or failure of the Corporation to make an increase
in compensation to which the Executive may be entitled under any
employment agreement; or
(c) subsequent to a Change in Control of the Corporation, a
failure by the Corporation to continue any bonus plans in which
the Executive is presently entitled to participate (the "Bonus
Plans") as the same may be modified from time to time but
substantially in the forms currently in effect, or a failure by
the Corporation to continue the Executive as a participant in the
Bonus Plans on at least the same basis as he presently
participates in accordance with the Bonus Plans; or
(d) subsequent to a Change in Control of the Corporation, the
failure by the Corporation to continue in effect (subject to such
changes as may be required by law from time to time) any benefit
or compensation plan, stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health-and-accident plan
or disability plan in which the Executive is participating at the
time of Change in Control of the Corporation (or plans
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providing him with substantially similar benefits), the taking of
any action by the Corporation which would adversely affect the
Executive's participation in or materially reduce his benefits
under any of such plans or deprive him of any material fringe
benefit enjoyed by him at the time of the Change in Control, or
the failure by the Corporation to provide him with the number of
paid vacation days to which he is then entitled in accordance
with the Corporation's normal vacation policy in effect on the
date hereof; or
(e) prior to a Change in Control of the Corporation, the failure
by the Corporation to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in
Section III(D) hereof.
III. GENERAL.
A. INDEMNIFICATION. (1) The Corporation shall indemnify the Executive
for all reasonable attorney fees and other expenses incurred in connection
with enforcement or interpretation of this Agreement or any provision
contained herein, such indemnification to be payable as and when the
Executive is billed for such attorney fees or other expenses. The
Indemnification provided for hereunder shall be payable notwithstanding any
judgment or decision adverse to the Executive resulting from any litigation
or arbitration ("Proceeding") in connection with this agreement provided
that, if such Proceeding is commenced by the Executive, the Executive acted
in good faith in commencing the Proceeding. The Corporation hereby agrees
to pay pre-judgment interest on any money judgment or award obtained by the
Executive in
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connection with this agreement, calculated at the prime interest rate of
the Fleet Bank of New York in effect from time to time from the date that
payment(s) to him should have been made under this Agreement.
(2) (a) If, following a Change in Control, for any taxable year
the Executive shall be liable for the payment of an excise tax under
Section 4999 of the Code or any successor provision of the Code
thereto (Section 4999 of the Code and any successor provision thereto
hereinafter collectively "Section 4999 of the Code"), with respect to
any payment of money or property made by the Corporation or any direct
or indirect subsidiary or affiliate of the Corporation to (or for the
benefit of) the Executive, the Corporation shall pay to the Executive
an amount equal to X determined under the following formula:
E x P
X = -----------------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
X = the amount to be paid to the Executive under this section III.A(2)(a);
E = the rate at which the excise tax is assessed under Section 4999 of the
Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this section III.A(2);
FI = the highest marginal rate of income tax applicable to the Executive
under the Code for the taxable year in question; and
SLI = the sum of the highest marginal rates of income tax applicable to
the Executive under applicable state and local laws for the taxable
year in question; and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
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With respect to any payment that is made to the Executive under the terms
of this Agreement, or otherwise, and on which an excise tax under Section
4999 of the Code will be assessed, the payment determined under this
section III.A(2) shall be made to the Executive not later than the earlier
of (i) the date the Corporation or any direct or indirect subsidiary or
affiliate of the Corporation is required to withhold such tax, or (ii) the
date the tax is required to be paid by the Executive. With respect to any
payment made under the terms of this Agreement in any other year and on
which an excise tax under Section 4999 of the Code will be assessed, the
payment under this section III.A(2) shall be made to the Executive not
later than December 31st of the year in which the payment on which such
excise tax will be assessed is made to the Executive.
(b) Notwithstanding anything in this section III.A(2) to the contrary,
in the event that the Executive's liability for the excise tax under
Section 4999 of the Code for a taxable year is subsequently determined to
be different than the amount determined by the formula (X + P) x E, where
X, P and E have the meanings provided in section III.A(2)(a), the Executive
or the Corporation, as the case may be, shall pay to the other party at the
time that the amount of such excise tax is finally determined, an
appropriate amount, plus interest, such that the payment made under section
III.A(2)(a), when increased by the amount of the payment made to the
Executive under this section III.A(2)(b) by the Corporation, or when
reduced by the amount of the payment made to the Corporation under this
section III.A(2)(b) by the Executive, equals the amount that should have
been properly paid to the Executive under section III.A(2)(a). The interest
paid under this Section III.A(2)(b) shall be determined at the rate
provided under Section 1274(b)(2)(B) of the Code. To confirm that the
proper amount, if any, was paid to the
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Executive under this Section III.A(2), the Executive shall furnish to the
Corporation a copy of each tax return which reflects a liability for an
excise tax payment under Section 4999 of the Code with respect to a payment
made by the Corporation, at least twenty (20) days before the date on which
such return is required to be filed with the Internal Revenue Service.
B. PAYMENT OBLIGATIONS ABSOLUTE. The Corporation's obligation
hereunder shall be considered severance pay in consideration of the
Executive's past service, and pay in consideration of his continued service
from the date hereof and shall not be affected in any circumstances,
including, without limitation, any set-off, counterclaim, recoupment,
defense or other right that the Corporation may have against him or anyone
else, or any duty by the Executive to mitigate his damages by seeking
further employment. All amounts payable by the Corporation hereunder shall
be paid without notice or demand. Each and every payment made hereunder by
the Corporation shall be final and the Corporation will not seek to recover
all or any part of such payment from the Executive or from whomsoever may
be entitled thereto, for any reason whatsoever.
C. CONTINUING OBLIGATIONS. The Executive shall retain in confidence
any confidential information known to him concerning the Corporation and
its subsidiaries and their respective businesses as long as such
information is not publicly disclosed.
D. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Executive and his estate, and the Corporation and any
successors of the Corporation, but neither this Agreement nor any rights
arising hereunder may be assigned or pledged by the Executive. The
Corporation will require any successor (whether direct or indirect, by
purchase,
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merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation, including the stock or assets of
any subsidiary, by agreement to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation
would be required to perform it if no such succession had taken place, a
copy of which agreement shall be delivered to the Executive prior to or
contemporaneously with such succession. Failure of the Corporation to
obtain such agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Corporation in the same amount and on the same terms
as he would be entitled hereunder in the event of a Termination as herein
provided. As used in this Agreement, "Corporation" shall include any
successor to substantially all of the business and/or assets of the
Corporation.
E. SEVERABILITY. Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability
without invalidating or affecting the remaining provisions hereof, and any
such prohibition or enforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
F. CONTROLLING LAW. This Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of New York,
without reference to conflict of law principles.
G. TERMINATION. This Agreement shall terminate if the Board
determines, prior to any Termination of the employment of the Executive,
that the Executive is no longer to be
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designated a key executive of the Corporation and so notifies the Executive
in writing; EXCEPT THAT such determination shall not be made, and if made
shall have no effect, (i) within three years after a Change in Control or
(ii) during any period of time when the Corporation has or should have
knowledge that any person has taken steps, or plans to or has proposed to
take steps, reasonably calculated to effect a Change in Control until, in
the opinion of the Board, the person has abandoned or terminated his or its
efforts to effect a Change in Control or (iii) following the commencement
of any discussions with any person that ultimately result in the occurrence
of a Change in Control or (iv) if undertaken at the instance or upon the
suggestion of any participant in a prospective Change in Control or any
agent or other person acting on behalf of or in conjunction with any such
participant in a prospective Change in Control. For purposes of section
(ii) of the preceding sentence, any decision by the Board that a person has
abandoned or terminated his or its efforts to effect a Change in Control
shall be conclusive and binding on the Executive, EXCEPT THAT no such
decision of the Board shall have effect if, within three years following
such decision being made by the Board, any person with respect to whose
abandonment or termination of an effort to cause a Change in Control a
Board determination was made, or any affiliate or agent of such a person,
effects or participates, directly or indirectly, in any activity causing or
assisting in the occurrence of, a Change in Control.
H. FRAUDULENT CONVEYANCE. Should the Corporation be unable to make any
payment called for by this Agreement, as a result of the whole or partial
transfer from its control, by whatever means, of the stock and/or assets of
Graham Manufacturing Co., Inc. or any successor thereto, such transfer
shall be deemed a fraudulent conveyance of assets, voidable to the
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extent necessary to fully discharge all of the obligations of the
Corporation to the Executive under this Agreement.
IV. PRIOR AGREEMENT. This instrument contains the entire agreement of the
parties hereto relating to the subject matter hereof and supersedes in its
entirety any and all prior agreements, understandings, representations, whether
or not in writing, relating to the subject matter hereof, but shall not affect
any Employment Agreement between the Executive and the Corporation and/or any of
its subsidiaries.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
28th day of July, 1995.
GRAHAM CORPORATION
By:/s/ F.D. Berkeley
---------------------------------
F.D. Berkeley
Chairman and Chief Executive Officer
ATTEST:
/s/ Cornelius S. Van Rees
- -----------------------------
Secretary
[SEAL]
EXECUTIVE
/s/ A. Cadena
-------------------------------
Alvaro Cadena
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GRAHAM CORPORATION
SENIOR EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT between Graham Corporation, a Delaware corporation (the
"Corporation"), and J. Ronald Hansen (the "Executive"), WITNESSETH:
WHEREAS, the Board of Directors (the "Board") of the Corporation has
approved the Corporation entering into severance agreements with persons
designated key executives of the Corporation or its Subsidiaries;
WHEREAS, the Executive has been designated as a key executive of the
Corporation or one of its Subsidiaries by the Board to be a party to this
Agreement; and
WHEREAS, should the Corporation receive any proposal from a person
concerning any possible business combination with, or acquisition of equity
securities of, the Corporation, the Board believes it imperative that the
Corporation and the Board be able to rely upon the Executive to continue in his
position, and that the Corporation be able to receive and rely upon his advice,
if it requests it, as to the best interests of the Corporation and its
shareholders without concern that he might be distracted by the personal
uncertainties and risks created by such a proposal; and
WHEREAS, should the Corporation receive any such proposals, in addition to
the Executive's regular duties, he may be called upon to assist in the
assessment of such proposals, to advise management and the Board as to whether
such proposals would be in the best interests
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of the Corporation and its shareholders, and to take such other actions as the
Board might determine to be appropriate;
NOW, THEREFORE, to assure the Corporation that it will have the continued
dedication of the Executive and the availability of his advice and counsel
notwithstanding the possibility, threat or occurrence of a bid to take over
control of the Corporation, and to induce the Executive to remain in the employ
of the Corporation, and for other good and valuable consideration, the
Corporation and the Executive agree as follows:
I. SERVICES DURING CERTAIN EVENTS. In the event a person begins a tender or
exchange offer, circulates a proxy to shareholders, or takes other steps seeking
to effect a Change in Control (as hereinafter defined), the Executive agrees
that he will not voluntarily leave the employ of the Corporation, and will
render the services contemplated in the recitals to this Agreement, until the
person has abandoned or terminated his or its efforts to effect a Change in
Control or until three months after a Change in Control has occurred.
II. TERMINATION AFTER CHANGE IN CONTROL. In the event of a Termination (as
hereinafter defined) of the Executive's employment with the Corporation
(including its Subsidiaries) either (a) within three years after a Change in
Control of the Corporation; or (b) in any of the situations described in
Sections III.G. (ii), III.G. (iii) or III.G. (iv) of this Agreement:
A. LUMP SUM CASH PAYMENT. On or before the Executive's last day of
employment with the Corporation, the Corporation will pay to the Executive
as compensation for services rendered to the Corporation a lump sum
(subject to any applicable payroll or other taxes required to be withheld)
in an amount equal to (i)
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one dollar less than three times the Executive's annualized tax-includable
compensation, including bonus compensation, for the five most recent
taxable years ending before the date of the Change in Control; or (ii) if
the Executive was employed by the Corporation for less than five years, one
dollar less than three times the Executive's annualized tax includable
compensation including bonus compensation for the period during which the
individual was continuously employed by the Corporation and ending on the
date of the Change in Control of the Corporation. In the event the
Executive dies at any time prior to receiving the lump sum payment but
following the occurrence of any event requiring the Corporation to pay it
under the terms of this Agreement, the payments provided for by this
paragraph shall be paid to the Executive's estate.
B. MONTHLY CASH PAYMENT. (i) At any time prior to the close of business on
the Executive's last day of employment with the Corporation, the Executive
may in writing elect to receive, instead of the lump sum cash payment
provided in Section II.A., consecutive monthly cash payments of a number to
be specified by the Executive but not to exceed 36. In the event of such
election, the Corporation will pay to the Executive as compensation for
services rendered to the Corporation equal consecutive monthly cash
payments (subject to any applicable payroll or other taxes required to be
withheld) of the number specified by the Executive, such that the sum of
the present value on the date of Termination of these payments in the
aggregate, as determined pursuant to Section B. (ii), is equal to the
amount
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specified by either Section II.A. (i) if the Executive has been employed by
the Corporation for five years or more, or Section II.A. (ii) if the
Executive has been employed by the Corporation for less than five years.
The Corporation will pay the Executive the first of such payments on or
before the Executive's last day of employment with the Corporation, and
will pay the remaining payments on the first day of each succeeding month
until the number of payments specified by the Executive has been paid. In
the event the Executive dies at any time prior to receiving all of the
monthly payments in the number specified by the Executive but following the
occurrence of any event requiring the Corporation to pay them under the
terms of this Agreement, the payments provided for by this paragraph shall
be paid to the Executive's estate. (ii) The present value of the amount
payable under this section II.B. shall be determined using the interest
rate prescribed by the Internal Revenue Code of 1986, as amended, (the
"Code") Section 1274(b)(2) and applicable regulations and the method
prescribed by Code Section 280G(d)(4) and regulations.
C. OTHER PROVISIONS.
(1) BONUS COMPENSATION. Any awards previously made to the Executive as
bonus compensation and not previously paid shall immediately vest on the
date of his Termination and shall be paid on that date. If the Executive's
Termination date and the date of Change in Control are the same, then the
bonus payment made on the date of termination shall be included as
compensation in the month when
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paid, for the purpose of determining the Executive's five-year annualized
tax-includable compensation as provided in paragraph II(A) herein.
(2) SAVINGS AND OTHER PLANS. The Executive's participation in any
applicable savings and/or profit sharing plan of the Corporation or any of
its subsidiaries, and any terminating distributions and/or vested rights
under such plans shall be governed by the terms of those respective plans.
(3) STOCK INCENTIVE PLAN; STOCK OPTION AND STOCK APPRECIATION RIGHTS.
Upon Termination of the Executive's employment the Corporation agrees to
accelerate and make immediately exercisable in full all unmatured
installments of all options which the Executive then holds to acquire
securities. Such options shall be exercisable by the Executive in
accordance with their terms.
(4) RETIREMENT BENEFITS. (a) The Executive shall be entitled to the
total retirement benefits actually payable to him or his beneficiaries
under the Corporation's retirement plans or any successor plans of the
Corporation, and in the amount and manner prescribed by such plans.
(b) Upon Termination of the Executive's employment with the
Corporation following a Change in Control, the Corporation shall pay
and provide to the Executive (or, in the event of his death, to his
estate) within twenty (20) days following his termination of
employment with the Corporation, a lump sum payment in an amount equal
to the excess, if any, of:
(i) the present value of the aggregate benefits to
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which he would be entitled under any and all qualified and
non-qualified defined benefit pension plans maintained by, or
covering employees of, the Corporation if he were 100% vested
thereunder, such benefits to be determined as of the date of
termination of employment; over
(ii) the present value of the benefits to which he is
actually entitled under such defined benefit pension plans as of
the date of his termination;
where such present values are to be determined using the mortality
tables prescribed under section 415(b)(2)(E)(v) of the Code and a
discount rate, compounded monthly, equal to the annualized rate of
interest prescribed under section 415 of the Code for the valuation of
lump sum payments for the month in which the Executive's termination
of employment occurs; provided, however, that if the Executive so
requests by notifying the Corporation prior to the close of business
on the Executive's last day of employment with the Corporation, the
above payment will be made in equal monthly cash payments of a number
to be specified by the Executive (but not to exceed thirty-six (36)),
and the present value of such monthly payments will equal the above
lump sum amount.
D. OTHER EMPLOYMENT. The Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under
any
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provision of this Agreement, nor shall any payments under this Agreement be
reduced on account of any compensation, benefits or service credits for
benefits from any employment that the Executive may obtain following his
Termination.
E. DEFINITIONS.
(1) "CHANGE IN CONTROL". For the purposes of this Agreement, a "Change in
Control" shall be deemed to have taken place if:
(a) as the result of, or in connection with, any cash tender or
exchange offer, consolidation, merger or other business combination,
sale of assets or contested election or elections, or any combination
of the foregoing transactions (a "Transaction"), the persons who were
directors of the Corporation before the Transaction shall cease for
any reason to constitute a majority of the Board of Directors of the
Corporation or any successor to the Corporation (including any entity
acquiring substantially all the assets of the Corporation); OR
(b) a "person" (as that term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act") as in effect
on the date hereof), including a "group" as defined in Section
13(d)(3) of the Exchange Act, becomes the beneficial owner, directly
or indirectly, of shares of the Corporation having 25% or more of the
total number of votes that may be cast for the election of Directors
of the Corporation; OR
(c) any event occurs with respect to the Corporation that would be
required
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to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A, or to Item 1 of Form 8-K, under the Securities Exchange Act of
1934, as amended.
(2) "TERMINATION". For the purposes of this Agreement, the term
"Termination" shall mean termination by the Corporation of the employment
of the Executive with the Corporation (including its subsidiaries) for any
reason other than death, disability or cause (as defined below), or
resignation of the Executive upon the occurrence of either of the following
events:
(a) A change in the nature or scope of the Executive's authority from
that prior to a Change in Control, a reduction in the Executive's
total compensation (including all and any base compensation, bonuses,
incentive compensation and benefits of any kind or nature whatsoever
and including but not limited to the benefits referred to in Paragraph
C of this Section II) from that prior to a Change in Control, or
failure of the Corporation to make any increase in compensation to
which the Executive may be entitled under any employment agreement, or
a change requiring the Executive to perform services other than in
Batavia, New York or in any location more than thirty miles distant
from Rochester, New York by road, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's present business travel obligations; or
(b) A reasonable determination (as defined below) by the Executive
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that, as a result of a Change in Control and a change in circumstances
thereafter significantly affecting his position, he is unable to
exercise the authority, powers, function or duties attached to his
position.
(3) "CAUSE". The term "cause" means fraud, misappropriation or intentional
material damage to the property or business of the Corporation or
commission of a felony.
(4) "DISABILITY" The term "disability" means the Executive's absence from
his duties with the Corporation on a full time basis for 6 successive
months, or for shorter periods aggregating 7 months or more in any year, as
a result of the Executive's incapacity due to physical or mental illness,
unless within 30 days after the Corporation gives written notice of
termination following such absence the Executive shall have returned to the
full time performance of his duties.
(5) "REASONABLE DETERMINATION". Termination of employment by the Executive
in his "reasonable determination" shall mean termination based on:
(a) subsequent to a Change in Control of the Corporation, and without
the Executive's express written consent, the assignment to him of any
duties inconsistent with his positions, duties, responsibilities and
status with the Corporation immediately prior to a Change in Control,
or a change in the Executive's reporting responsibilities, titles, or
offices as in effect immediately prior to a Change in Control, or any
removal of the Executive from or any failure to re-elect him to any of
such positions, except in
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connection with the termination of his employment for cause,
Disability or Retirement or as a result of his death or by the
Executive other than in a Reasonable Determination; or
(b) subsequent to a Change in Control of the Corporation, a reduction
by the Corporation in the Executive's base salary as in effect on the
date hereof or as the same may be increased from time to time, or
failure of the Corporation to make an increase in compensation to
which the Executive may be entitled under any employment agreement; or
(c) subsequent to a Change in Control of the Corporation, a failure by
the Corporation to continue any bonus plans in which the Executive is
presently entitled to participate (the "Bonus Plans") as the same may
be modified from time to time but substantially in the forms currently
in effect, or a failure by the Corporation to continue the Executive
as a participant in the Bonus Plans on at least the same basis as he
presently participates in accordance with the Bonus Plans; or
(d) subsequent to a Change in Control of the Corporation, the failure
by the Corporation to continue in effect (subject to such changes as
may be required by law from time to time) any benefit or compensation
plan, stock ownership plan, stock purchase plan, stock option plan,
life insurance plan, health-and-accident plan or disability plan in
which the Executive is participating at the time of Change in Control
of the Corporation (or plans
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providing him with substantially similar benefits), the taking of any
action by the Corporation which would adversely affect the Executive's
participation in or materially reduce his benefits under any of such
plans or deprive him of any material fringe benefit enjoyed by him at
the time of the Change in Control, or the failure by the Corporation
to provide him with the number of paid vacation days to which he is
then entitled in accordance with the Corporation's normal vacation
policy in effect on the date hereof; or
(e) prior to a Change in Control of the Corporation, the failure by
the Corporation to obtain the assumption of the agreement to perform
this Agreement by any successor as contemplated in Section III(D)
hereof.
III. GENERAL.
A. INDEMNIFICATION. (1) The Corporation shall indemnify the Executive
for all reasonable attorney fees and other expenses incurred in connection
with enforcement or interpretation of this Agreement or any provision
contained herein, such indemnification to be payable as and when the
Executive is billed for such attorney fees or other expenses. The
Indemnification provided for hereunder shall be payable notwithstanding any
judgment or decision adverse to the Executive resulting from any litigation
or arbitration ("Proceeding") in connection with this agreement provided
that, if such Proceeding is commenced by the Executive, the Executive acted
in good faith in commencing the Proceeding. The Corporation hereby agrees
to pay pre-judgment interest on any money judgment or award obtained by the
Executive in
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connection with this agreement, calculated at the prime interest rate of
the Fleet Bank of New York in effect from time to time from the date that
payment(s) to him should have been made under this Agreement.
(2) (a) If, following a Change in Control, for any taxable year the
Executive shall be liable for the payment of an excise tax under Section
4999 of the Code or any successor provision of the Code thereto (Section
4999 of the Code and any successor provision thereto hereinafter
collectively "Section 4999 of the Code"), with respect to any payment of
money or property made by the Corporation or any direct or indirect
subsidiary or affiliate of the Corporation to (or for the benefit of) the
Executive, the Corporation shall pay to the Executive an amount equal to X
determined under the following formula:
E x P
X = ----------------------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
X = the amount to be paid to the Executive under this section
III.A(2)(a);
E = the rate at which the excise tax is assessed under Section 4999 of
the Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this section III.A(2);
FI = the highest marginal rate of income tax applicable to the Executive
under the Code for the taxable year in question; and
SLI = the sum of the highest marginal rates of income tax applicable to
the Executive under applicable state and local laws for the taxable
year in question; and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
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With respect to any payment that is made to the Executive under the terms of
this Agreement, or otherwise, and on which an excise tax under Section 4999 of
the Code will be assessed, the payment determined under this section III.A(2)
shall be made to the Executive not later than the earlier of (i) the date the
Corporation or any direct or indirect subsidiary or affiliate of the Corporation
is required to withhold such tax, or (ii) the date the tax is required to be
paid by the Executive. With respect to any payment made under the terms of this
Agreement in any other year and on which an excise tax under Section 4999 of the
Code will be assessed, the payment under this section III.A(2) shall be made to
the Executive not later than December 31st of the year in which the payment on
which such excise tax will be assessed is made to the Executive.
(b) Notwithstanding anything in this section III.A(2) to the contrary,
in the event that the Executive's liability for the excise tax under
Section 4999 of the Code for a taxable year is subsequently determined to
be different than the amount determined by the formula (X + P) x E, where
X, P and E have the meanings provided in section III.A(2)(a), the Executive
or the Corporation, as the case may be, shall pay to the other party at the
time that the amount of such excise tax is finally determined, an
appropriate amount, plus interest, such that the payment made under section
III.A(2)(a), when increased by the amount of the payment made to the
Executive under this section III.A(2)(b) by the Corporation, or when
reduced by the amount of the payment made to the Corporation under this
section III.A(2)(b) by the Executive, equals the amount that should have
been properly paid to the Executive under section III.A(2)(a). The interest
paid under this Section III.A(2)(b) shall be determined at the rate
provided under Section 1274(b)(2)(B) of the Code. To confirm that the
proper amount, if any, was paid to the
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Executive under this Section III.A(2), the Executive shall furnish to the
Corporation a copy of each tax return which reflects a liability for an
excise tax payment under Section 4999 of the Code with respect to a payment
made by the Corporation, at least twenty (20) days before the date on which
such return is required to be filed with the Internal Revenue Service.
B. PAYMENT OBLIGATIONS ABSOLUTE. The Corporation's obligation hereunder
shall be considered severance pay in consideration of the Executive's past
service and agreement to accept employment with the Corporation, and pay
in consideration of his continued service from the date hereof and shall
not be affected in any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right that the
Corporation may have against him or anyone else, or any duty by the
Executive to mitigate his damages by seeking further employment. All
amounts payable by the Corporation hereunder shall be paid without notice
or demand. Each and every payment made hereunder by the Corporation shall
be final and the Corporation will not seek to recover all or any part of
such payment from the Executive or from whomsoever may be entitled
thereto, for any reason whatsoever.
C. CONTINUING OBLIGATIONS. The Executive shall retain in confidence any
confidential information known to him concerning the Corporation and its
subsidiaries and their respective businesses as long as such information
is not publicly disclosed.
D. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Executive and his estate, and the Corporation and any
successors of the Corporation, but neither this Agreement nor any rights
arising hereunder may be assigned or pledged by the Executive. The
Corporation will require any successor (whether direct or indirect, by
purchase,
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merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation, including the stock or assets of
any subsidiary, by agreement to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation
would be required to perform it if no such succession had taken place, a
copy of which agreement shall be delivered to the Executive prior to or
contemporaneously with such succession. Failure of the Corporation to
obtain such agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Corporation in the same amount and on the same terms
as he would be entitled hereunder in the event of a Termination as herein
provided. As used in this Agreement, "Corporation" shall include any
successor to substantially all of the business and/or assets of the
Corporation.
E. SEVERABILITY. Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability
without invalidating or affecting the remaining provisions hereof, and any
such prohibition or enforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
F. CONTROLLING LAW. This Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of New York,
without reference to conflict of law principles.
G. TERMINATION. This Agreement shall terminate if the Board determines,
prior to any Termination of the employment of the Executive, that the
Executive is no longer to be
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designated a key executive of the Corporation and so notifies the Executive
in writing; EXCEPT THAT such determination shall not be made, and if made
shall have no effect, (i) within three years after a Change in Control or
(ii) during any period of time when the Corporation has or should have
knowledge that any person has taken steps, or plans to or has proposed to
take steps, reasonably calculated to effect a Change in Control until, in
the opinion of the Board, the person has abandoned or terminated his or its
efforts to effect a Change in Control or (iii) following the commencement
of any discussions with any person that ultimately result in the occurrence
of a Change in Control or (iv) if undertaken at the instance or upon the
suggestion of any participant in a prospective Change in Control or any
agent or other person acting on behalf of or in conjunction with any such
participant in a prospective Change in Control. For purposes of section
(ii) of the preceding sentence, any decision by the Board that a person has
abandoned or terminated his or its efforts to effect a Change in Control
shall be conclusive and binding on the Executive, EXCEPT THAT no such
decision of the Board shall have effect if, within three years following
such decision being made by the Board, any person with respect to whose
abandonment or termination of an effort to cause a Change in Control a
Board determination was made, or any affiliate or agent of such a person,
effects or participates, directly or indirectly, in any activity causing or
assisting in the occurrence of, a Change in Control.
H. FRAUDULENT CONVEYANCE. Should the Corporation be unable to make any
payment called for by this Agreement, as a result of the whole or partial
transfer from its control, by whatever means, of the stock and/or assets of
Graham Manufacturing Co., Inc. or any successor thereto, such transfer
shall be deemed a fraudulent conveyance of assets, voidable to the
35
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extent necessary to fully discharge all of the obligations of the
Corporation to the Executive under this Agreement.
IV. PRIOR AGREEMENT. This instrument contains the entire agreement of
the parties hereto relating to the subject matter hereof and supersedes in
its entirety any and all prior agreements, understandings, representations,
whether or not in writing, relating to the subject matter hereof, but shall
not affect any Employment Agreement between the Executive and the
Corporation and/or any of its subsidiaries.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the 28th day of July, 1995.
GRAHAM CORPORATION
By: /s/ F.D. Berkeley
---------------------------------
F.D. Berkeley
Chairman and Chief Executive Officer
ATTEST:
/s/ Cornelius S. Van Rees
- -----------------------------
Secretary
[SEAL]
EXECUTIVE
/s/ J. Ronald Hansen
-------------------------------
J. Ronald Hansen