ATHEY PRODUCTS CORP
THOMAS N. NELSON EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>THOMAS N. NELSON EMPLOYMENT AGREEMENT
<TEXT>

<PAGE>

                                                                    EXHIBIT 10.1

                             EMPLOYMENT AGREEMENT

     This Employment Agreement (the "Agreement") is made as of the 1st day of
                                     ---------
June, 2000, by and between Athey Products Corporation, a Delaware corporation
with its principal office in Wake Forest, North Carolina (the "Corporation") and
                                                               -----------
Thomas N. Nelson, an individual residing in Raleigh, North Carolina,
("Employee").
  --------

                      STATEMENT OF BACKGROUND AND PURPOSE:

     WHEREAS, Employee is currently employed by the Corporation and the
Corporation and Employee desire to change certain terms of Employee's employment
and to formalize their agreement in writing; and

     WHEREAS, this Agreement is intended to reinforce the continued attention
and dedication of senior management to their assigned duties.

     NOW, THEREFORE, in consideration of the mutual promises and covenants of
the parties, together with other valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the Corporation and Employee have
agreed as follows:

     1.   Employment/Continuous Service.  The Corporation hereby employs
Employee and Employee hereby accepts employment by the Corporation upon the
terms and conditions of this Agreement.  The parties hereto acknowledge and
agree that, for purposes of this Agreement and Employee's employment by the
Corporation, no breach or interruption in the employment of or service by
Employee shall have occurred as a result of the Corporation and Employee
entering into this Agreement.

     2.   Duties.  Employee shall serve as President and Chief Executive Officer
of the Corporation. Employee shall perform such duties as may be reasonably
required by the Board of Directors or Chairman of the Corporation from time to
time.  Changes in or additions to Employee's duties or title(s) under this
Agreement are not to be accompanied by additional compensation unless expressly
agreed to by the Corporation.  During the term of this Agreement, Employee
agrees to serve the Corporation faithfully and to devote substantially his
entire time, attention and energies to the business of the Corporation and to
the proper and timely discharge of Employee's duties.

     3.   Remuneration and Fringe Benefits.  As full and complete remuneration
for all personal services rendered as an employee pursuant to Section 2 hereof,
for so long as Employee is employed hereunder by the Corporation, Employee shall
receive the following:

          3.1  Annual Base Salary.  A base salary at the rate of One Hundred Ten
               ------------------
Thousand Dollars ($110,000) per year, payable in accordance with the
Corporation's policy and subject to adjustment by the Board of Directors of the
Corporation ("Annual Base Salary").
              ------------------

          3.2  Bonus.  For each annual period during the term of this Agreement,
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a bonus to be determined in accordance with the Corporation's then existing
bonus plan as applicable to management or any successor plan.

          3.3  Fringe Benefits.  Such applicable fringe benefits as may be
               ---------------
provided by the Corporation from time to time; provided Employee is otherwise
eligible and desires to participate; and provided further, that the Corporation
shall not be obligated hereby to implement any benefits not presently in
existence or to continue to maintain any benefits presently in existence or to
provide special benefits to Employee.
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          3.4  Vacation.  Vacation each year with pay in accordance with the
               --------
Corporation's policy.

          3.5  Business Expenses.  Reimbursement for all ordinary, necessary and
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reasonable business expenses, including without limitation travel expenses,
incurred by Employee in accordance with the Corporation's policy in effect from
time to time and in connection with the performance of his duties pursuant to
Section 2 hereof.  Reimbursement of such expenses shall be made provided that
Employee presents appropriate written vouchers, bills, reports or other
substantiation for such expenses in form acceptable to the Internal Revenue
Service and in compliance with the Corporation's policy.

     4.   Term and Termination.

          4.1  Term of Employment.  Employee's term of employment hereunder
               ------------------
shall commence on the date of the execution of this Agreement and shall continue
for eighteen (18) months or until terminated as provided herein.
Notwithstanding anything to the contrary contained herein, Employee's employment
shall be at-will.

          4.2  Termination.  This Agreement may be terminated for any reason by
               -----------
either party at any time.  Termination of employment shall constitute
termination of the Corporation's obligations under Section 3 hereof, including
Employee's right to receive all or any portion of any bonuses contemplated by
Section 3.2, effective immediately upon termination of employment.

     5.   Change in Control Provisions.

          5.1  Qualifying Termination Payment.  If Employee incurs a Qualifying
               ------------------------------
Termination (as defined below), the Corporation shall be obligated to pay
Employee (in a lump sum) an amount equal to the unpaid portion of Annual Base
Salary which remains from the date of the Qualifying Termination through the
eighteen (18) month anniversary of the date of this Agreement and shall include
the value of any accrued benefits owed Employee pursuant to Section 3.3 hereof.
Such amount shall be payable to Employee, without interest and subject to
applicable withholding taxes and other regular payroll deductions.

          5.2  Certain Definitions.  As used herein:
               -------------------

          (a)  "Change in Control" means the occurrence of any of the following
                -----------------
events:

               (i)    an acquisition (other than directly from the Corporation)
     of any voting securities of the Corporation by any "Person" (as the term
                                                         ------
     person is used for purpose of Section 13(d) or 14(d) of the Securities
     Exchange Act of 1934, as amended (the "Exchange Act")), immediately after
                                            ------------
     which such Person has "Beneficial Ownership" (within the meaning of Rule
                            --------------------
     13d-3 promulgated under the Exchange Act) of greater than fifty percent
     (50%) of the then outstanding shares or the combined voting power of the
     Employee's then outstanding voting securities; provided, however, in
                                                    --------  -------
     determining whether a Change in Control has occurred, shares or voting
     securities which are acquired by an employee benefit plan maintained by the
     Corporation or by the Corporation or its subsidiaries shall not trigger a
     Change in Control.

               (ii)   the individuals who, as of the date of this Agreement are
     members of the Board (the "Incumbent Board"), cease for any reason to
                                ---------------
     constitute at least fifty-one percent (51%) of the members of the Board of
     Directors of the Corporation; provided, however, that if the election, or
     nomination for election by the Corporation's common stockholders, of any
     new director was approved by a vote of at least a majority of the Incumbent
     Board, such new director shall, for

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     purposes of this Agreement, be considered as a member of the Incumbent
     Board; provided further, however, that no such individual shall be
     considered a member of the Incumbent Board if such individual initially
     assumed office as a result of either an actual or threatened "Election
                                                                   --------
     Contest" (as described in Rule 14a-11 promulgated under the Exchange Act)
     -------
     or other actual or threatened solicitation of proxies or consents by or on
     behalf of a Person other than the Board (a "Proxy Contest") including by
                                                 -------------
     reason of any agreement intended to avoid settle any Election Contest or
     Proxy Contest; or

               (iii)  The consummation of:

                      (A)     A merger, consolidation or reorganization
          involving the Corporation, unless such merger, consolidation or
          reorganization is a "Non-Control Transaction." A "Non-Control
                               -----------------------      -----------
          Transaction" shall mean a merger, consolidation or reorganization of
          -----------
          the Corporation where:

                              (1)  the stockholders of the Corporation,
               immediately before such merger, consolidation or reorganization,
               own directly or indirectly immediately following such merger,
               consolidation or reorganization, at least fifty percent (50%) of
               the combined voting power of the outstanding voting securities of
               the corporation resulting from such merger or consolidation or
               reorganization (the "Surviving Corporation") in substantially the
                                    ---------------------
               same proportion as their ownership of the Voting Securities
               immediately before such merger, consolidation or reorganization,

                              (2)  the individuals who were members of the
               Incumbent Board immediately prior to the execution of the
               agreement providing for such merger, consolidation or
               reorganization constitute at least fifty-one percent (51%) of the
               members of the board of directors of the Surviving Corporation,
               or a corporation beneficially directly or indirectly owning a
               majority of the voting securities of the Surviving Corporation,
               and

                              (3)  no Person other than (i) the Corporation,
               (ii) any subsidiary of the Corporation, (iii) any employee
               benefit plan (or any trust forming a part thereof) that,
               immediately prior to such merger, consolidation or
               reorganization, was maintained by the Company, or any Subsidiary,
               or (iv) any Person who, immediately prior to such merger,
               consolidation or reorganization had Beneficial Ownership of fifty
               percent (50%) or more of the then outstanding voting securities,
               has Beneficial Ownership of fifty percent (50%) or more of the
               combined voting power of the Surviving Corporation's then
               outstanding voting securities or its common stock.

                    (B)  A complete liquidation or dissolution of the
          Corporation; or

                    (C)  The sale or other disposition of all or substantially
          all of the assets of the Corporation to any Person (other than a
          transfer to a Subsidiary).

          (b) "Good Reason" means the occurrence of any of the following events
               -----------
following a Change in Control:

               (i)    a change in Employee's position or responsibilities
     (including reporting responsibilities) with the Corporation which
     represents a material impairment of, and is not

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     substantially equivalent to, Employee's position or responsibilities in
     effect immediately before the Change in Control, except in connection with
     the termination of his employment for Cause, as a result of his death or by
     Employee other than for Good Reason;

               (ii)   a reduction in Employee's Annual Base Salary as in effect
     immediately before the Change in Control or any failure to pay Employee any
     compensation or benefits to which he is entitled under the terms of this
     Agreement within five (5) days of the date due;

               (iii)  the failure by the Corporation to (A) continue in effect
     (without reduction in benefit level and/or reward opportunities) any
     material compensation or benefit plan in which Employee was participating
     at the time of the Change in Control or (B) provide Employee with
     compensation and benefits at least equal (in terms of benefit levels and/or
     reward opportunities) to those provided for under each employee benefit
     plan, program and practice as in effect immediately prior to the Change in
     Control (or as in effect following the Change in Control, if greater).

               (iv)   the insolvency or the filing (by any party, including the
     Corporation) of a petition for bankruptcy of the Corporation;

               (v)    any material breach by the Corporation of any provision of
     this Agreement;

               (vi)   the failure of the Corporation to obtain an agreement,
     from any successor or assign of the Corporation to assume and agree to
     perform this Agreement, as contemplated in Section 8(f) hereof; or

               (vii)  the Corporation requires Employee to be based at any
     office located more than thirty-five (35) miles from the office where
     Employee is currently based without Employee's consent.

          (c)  "Cause" means:
                -----

               (i)    Willful failure of Employee to substantially comply with
     reasonable written directives of the Corporation's Board of Directors or
     its Chairman;

               (ii)   Any of the following actions by Employee, if in the
     judgment of the Corporation's Board of Directors such actions are
     materially injurious to Corporation:

                      (A)  chronic absenteeism;

                      (B)  willful misconduct;

                      (C)  actions involving moral turpitude; or

                      (D)  illegal use of controlled substances;

               (iii)  Chronic illness or chronic disability of Employee that,
     in the judgment of the Corporation's Board of Directors, results in the
     inability of Employee to perform the essential functions of his job
     hereunder with reasonable accommodation; or

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<PAGE>

               (iv)   Material breach or default by Employee hereunder, which
     shall remain uncured five (5) days after receipt of written notice from the
     Corporation that a material breach or default has occurred and is
     continuing.

          (d)  "Qualifying Termination" means a termination of Employee's
                ----------------------
employment which:

               (i)    is effected by

                      (A) the Corporation other than for Cause, or

                      (B) Employee for Good Reason, provided that Employee has
          given the Corporation thirty (30) days advance written notice of his
          contention that circumstances constituting Good Reason exist and
          provided further that the Corporation has not taken steps within such
          thirty (30) day period to eliminate the existence of circumstances
          that constitute Good Reason; and

               (ii)   occurs prior to the eighteen (18) month anniversary of
     this Agreement; or in the case of termination of employment by Employee for
     Good Reason, if Employee's notice of termination is received by the
     Corporation prior to the eighteen (18) month anniversary of this Agreement.

          5.3  If a Qualifying Termination occurs, the Corporation's obligations
under this Section 5, shall survive termination of this Agreement to the extent
applicable.

     6.   Confidentiality Obligations.  It is stipulated and agreed that
Corporation is engaged in the business of the development, manufacture, sale and
service of heavy duty street-sweeping equipment and other material handling and
clearing equipment and parts (the "Business").  It is further stipulated and
                                   --------
agreed that as a result of Employee's employment by the Corporation, and as a
result of his continued employment hereunder, Employee has had and will have
access to valuable, highly confidential, privileged, and proprietary information
relating to Corporation's Business, including, without limitation, existing and
future equipment information, customer lists, identities of distributors and
distributorships, sales methods and techniques, costs and costing methods,
pricing techniques and strategies, sales agreements with customers, profits and
product line profitability information, unpublished present and future marketing
strategies and promotional programs, and other information regarded by
Corporation as proprietary and confidential (the "Confidential Information").
                                                  ------------------------
It is further acknowledged that unauthorized use or disclosure by Employee of
Confidential Information would seriously damage Corporation in its Business.

          6.1  During the term of this Agreement and after its termination or
expiration for any reason, Employee will not, without Corporation's prior
written consent, use, divulge, disclose, furnish, or make accessible to any
third person, company, or other entity any aspect of Confidential Information
(other than as required in the ordinary discharge of Employee's duties
hereunder).

          6.2  During the term of the Agreement and after its termination or
expiration for any reason, Employee shall not, without the prior written consent
of the Corporation, communicate or divulge any information regarding the
circumstances or amounts payable under this Agreement; provided, that nothing in
this paragraph shall prevent Employee from sharing with his spouse and
confidential legal and financial advisors general information regarding the
amount of his compensation as may be necessary to make basic financial decisions
or disclosing general information about Employee's work experience prior to the
effective date of this Agreement (not including any Confidential Information) to
prospective employees

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<PAGE>

if necessary to enable Employee to obtain placement at a salary and other
benefits commensurate with Employee's past consideration.

          6.3  In the event of a breach or threatened breach by Employee of
any of the confidentiality obligations contained in this Section 6, the
Corporation, in addition to and not in derogation of any other remedies it may
have, shall be entitled to an injunction restraining Employee from violating or
continuing any violation of such obligations.

          6.4  The provisions of this Section 6 shall survive the expiration or
termination of this Agreement for any reason.

     7.   Addresses for Notices.  Any notice contemplated, required, or
permitted under this Agreement shall be sufficient if in writing and shall be
deemed given when delivered personally or mailed by registered or certified
mail, return receipt requested, to the addresses listed below:

     (a)  To Corporation:     Athey Products Corporation
                              1839 South Main Street
                              Wake Forest, North Carolina 27587
                              Attn.: President

     (b)  To Employee:        Thomas N Nelson
                              1816 Whittington Dr
                              Raleigh NC 27614

or such subsequent address(es) as the respective parties may hereafter
designate.

     8.   Miscellaneous.

          (a)  Employee acknowledges that all files, records, lists, designs,
specifications, formulas, books, products, and other materials owned and used by
the Corporation in connection with the conduct of its Business shall at all
times remain the property of the Corporation, and that upon termination or
expiration of this Agreement or employment hereunder for any reason, Employee
will surrender to the Corporation all such materials.

          (b)  The waiver by either party of any breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.

          (c)  The provisions of this Agreement, particularly Section 6, are
hereby deemed by the parties to be severable, and the invalidity or
unenforceability of any one or more of the provisions of this Agreement shall
not affect the validity or enforceability of the other provisions hereof.

          (d)  Employee has carefully read and considered the provisions of this
Agreement and expressly agrees that the provisions hereof, including without
limitation the Restrictive Covenants, are fair and reasonable and reasonably
required for the Corporation's protection as a result of the continuing
employment of Employee by the Corporation hereunder.

          (e)  This Agreement shall in all respects be governed by and construed
according to the laws of the State of North Carolina, without regard to any
conflicts of laws provisions.

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<PAGE>

          (f)  This Agreement shall be binding upon and shall inure to the
benefit of the Corporation, its successors and assigns.  This Agreement, being
personal in nature to Employee, may not be assigned by Employee without the
Corporation's prior written consent.

          (g)  This Agreement contains the entire agreement of the parties
hereto, and supersedes any previous agreements, whether written or oral, between
the parties with respect to the matters set forth herein, and may not be changed
or amended orally, but only by an agreement in writing expressly purporting to
amend this Agreement signed by both parties hereto.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal, as is their intention, as of the day and year first above written.


                              ATHEY PRODUCTS CORPORATION


                              By: /s/ William H. Warden
                                     ----------------------
                              Title: VP. Finance
                                     ----------------------


                                     /s/ Thomas N. Nelson
                                     ----------------------(SEAL)
                                         Thomas N. Nelson

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