Exhibit
10.1


 


AMENDED AND RESTATED EMPLOYMENT AGREEMENT


 


THIS AMENDED AND RESTATED EMPLOYMENT
AGREEMENT, dated as of May 7, 2009 (this “Agreement”), is entered
into by and between Axsys Technologies, Inc., a Delaware corporation (the “Company”),
and Stephen W. Bershad (the “Executive”).


 


WHEREAS, the Executive currently serves as
Chairman (“Chairman”) of the Board of Directors of the Company (the “Board”)
and Chief Executive Officer of the Company (“CEO”);


 


WHEREAS, the Company and the Executive have
entered into an Employment Agreement, originally dated as of October 12,
2000 and most recently amended and restated as of December 22, 2008 (the “Prior
Agreement”), that sets forth certain terms and conditions of the Executive’s
employment as Chairman and CEO;


 


WHEREAS, the Company and the Executive have
also entered into an Amended and Restated Severance Protection Agreement, dated
as of December 22, 2008 (the “SPA”), that provides the Executive
with certain benefits in the event the Executive’s employment with the Company
is terminated as a result of, or in connection with, a Change in Control (as
defined in Section 6 below); and


 


WHEREAS, the Company and the Executive desire
to consolidate the terms of the Prior Agreement and the SPA into an amended and
restated version of the Prior Agreement on the terms set forth herein, which
shall replace and supersede the Prior Agreement and the SPA in their entirety.


 


NOW, THEREFORE, in consideration of the
mutual covenants contained herein, the parties hereto agree as follows:


 


1.             Employment Term.  The “Employment Term” shall continue
as of December 22, 2008 (the “Effective Date”) and shall expire on
the fifth anniversary of the termination of the Initial Period, unless earlier
terminated as provided herein.


 


2.             Employment.


 


(a)           The
Company agrees to employ the Executive and the Executive agrees to perform
services as an employee of the Company during the Employment Term as described
above.  During the Initial Period (and
thereafter as the Company and the Executive may agree), the Executive shall be
employed as Chairman and CEO.  For
purposes of this Agreement, the “Initial Period” shall commence on the
Effective Date and continue until, and end upon, the first anniversary of the
Effective Date; provided, however, that on the calendar day
immediately preceding the first anniversary of the Effective Date (the “Renewal
Date”) and on each anniversary of the Renewal Date thereafter during the
Employment Term (each such date, an “Extension Deadline”), the Initial
Period shall automatically be extended for one additional year unless either
(i)(A) the Company, acting through its Board, gives the Executive written
notice not later than thirty (30) days prior to the applicable Extension
Deadline or (B) the Executive gives the Company written notice not later
than thirty (30) days prior to the applicable Extension


 

















 


Deadline, that the Initial Period should not be so extended or (ii) the
Employment Term has been earlier terminated in accordance with this
Agreement.  Upon termination of the
Initial Period and for the remainder of the Employment Term, the Executive
shall be appointed and serve or continue to serve as Chairman.  As Chairman and/or CEO, the Executive shall
perform the duties, undertake the responsibilities and exercise the authority
customarily performed, undertaken and exercised by him in accordance with past
practice, including without limitation, the responsibility for determining the
strategic direction of the Company and any entity, directly or indirectly,
controlled by, controlling or under common control with the Company (“Affiliates”),
and such other duties and responsibilities and/or any changes in the duties and
responsibilities set forth above, as agreed to by the Executive and the Company
from time to time.  In performing his
duties hereunder, the Executive will report directly to the Board.


 


(b)           During
the Initial Period, excluding periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote such portion of his
business time and attention to the business and affairs of the Company as may
be necessary to fulfill his responsibilities hereunder; provided, however,
that the Executive may (i) serve on corporate, civic or charitable boards
or committees; (ii) manage personal investments; and (iii) deliver
lectures and teach at educational institutions, so long as such activities do
not significantly interfere with the performance of the Executive’s
responsibilities hereunder.  The parties
acknowledge and agree that, during the Employment Term, the Executive may
pursue other business interests and endeavors unrelated to the business and
affairs of the Company and that, following the Initial Period, such other
interests and endeavors may constitute a significant portion of the Executive’s
business time and attention.


 


(c)           During
the Employment Term, the Company shall provide the Executive with an
appropriate office and administrative support at one of the Company’s offices,
commensurate with the Executive’s status and position.  The Executive shall not be required to live
at or near any of the offices of the Company.


 


3.             Compensation.  In consideration of the performance by the
Executive of the Executive’s obligations during the Employment Term (including
any services by the Executive as an officer, director, employee or member of
any committee of any Affiliate of the Company, or otherwise on behalf of the
Company), the Executive shall be compensated as follows:


 


(a)           Base
Salary.  The Executive shall receive
a base salary (the “Base  Salary”) at an annual rate not less than
the Executive’s rate of base salary immediately prior to the Effective
Date.  The Base Salary shall be reviewed
by the Board from time to time in its sole discretion.  The Base Salary shall be payable in
accordance with the normal payroll practices of the Company then in effect.


 


(b)           Bonus.  For each fiscal year of the Company ending
during the Employment Term, the Company shall provide the Executive with the
opportunity to earn an annual incentive bonus based on performance goals
determined by the Board at the beginning of such fiscal year.


 


2

















 


(c)           Equity
Awards.  The Executive shall
participate in the Company’s Long-Term Stock Incentive Plan or any successor
plan on terms and at such level as may be determined by the Board from time to
time consistent with such plans.


 


(d)           Benefits.  The Executive shall be entitled to
participate in any employee or executive benefit plans, policies or programs
that are provided generally to senior executives of the Company as such plans,
policies or programs may be in effect from time to time.


 


(e)           Expenses.  The Executive will be entitled to
reimbursement of all reasonable business, travel and entertainment expenses
incurred by him on behalf of the Company in the course of the performance of
his duties hereunder; provided, however, that such expenses must
be paid no later than the last day of the calendar year following the calendar
year in which such expenses were incurred, and further provided that in no
event will the amount of expenses so reimbursed in one taxable year affect the
amount of expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year.


 


(f)            Taxes.  Subject to Section 7(d) and Annex A,
the Executive shall be solely responsible for taxes imposed on the Executive by
reason of any compensation and benefits provided under this Agreement, and all
such compensation and benefits shall be subject to applicable withholding
taxes.


 


4.             Termination. 
The Employment Term shall terminate upon the earliest to occur of any of
the following events:


 


(a)           Mutual
Agreement.  Termination by the mutual
agreement of the Company and the Executive.


 


(b)           Expiration
of Employment Term.  The sixth
anniversary of the Effective Date (or such later date as determined in
accordance with Section 1 and Section 2(a) or as may be agreed
upon by the Board and the Executive).


 


(c)           Death.  The death of the Executive.


 


(d)           Disability.  The termination of the Executive’s employment
by the Company for Disability.  For
purposes of this Agreement, “Disability” shall mean the inability of the
Executive to perform his duties, services and responsibilities hereunder by
reason of a physical or mental infirmity, as reasonably determined by the
Board, for a total of 180 consecutive days, and within the time period set
forth in a Notice of Termination given to the Executive (which time period
shall not be less than thirty (30) days), the Executive shall not have returned
to full-time performance of his duties; provided, however, that
if the Company’s Long-Term Disability Plan, or any successor plan (the “Disability
Plan”), is then in effect, the Executive shall not be deemed disabled for
purposes of this Agreement unless the Executive is also eligible for long-term disability
benefits under the Disability Plan (or similar benefits in the event of a
successor plan).


 


3

















 


(e)           By
the Company for Cause.  The
termination of the Executive’s employment by the Company for Cause.  For purposes of this Agreement, “Cause” shall
mean that the Executive:


 


(i)            has
been convicted of a felony (including a plea of nolo contendere); or


 


(ii)           intentionally
and continually failed substantially to perform his reasonably assigned duties
with the Company (other than a failure resulting from the Executive’s
incapacity due to physical or mental illness until such conditions result in a
Disability or from the assignment to the Executive of duties that would
constitute Good Reason) which failure continued for a period of at least thirty
(30) days after a written notice of demand for substantial performance, signed
by a duly authorized officer of the Company, has been delivered to the
Executive specifying the manner in which the Executive has failed substantially
to perform such duties; or


 


(iii)          intentionally
engaged in illegal conduct or willful misconduct which is demonstrably and
materially injurious to the Company.


 


For purposes of this
Agreement, no act, or failure to act, on the Executive’s part shall be
considered “intentional” unless the Executive has acted, or failed to act, with
a lack of good faith and with a lack of reasonable belief that the Executive’s
action or failure to act was in the best interest of the Company.  Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based
upon the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company.  The
termination of employment of the Executive shall not be deemed to be for Cause
pursuant to subparagraph (ii) or (iii) above unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-fourths of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (ii) or (iii) above, and specifying the
particulars thereof in detail. 
Notwithstanding anything contained in this Agreement to the contrary, no
failure to perform by the Executive after a Notice of Termination (as defined
below) is given to the Company by the Executive shall constitute Cause for
purposes of this Agreement.


 


(f)            By
the Company Without Cause.  The
termination of the Executive’s employment by the Company other than for Cause
or Disability.


 


(g)           By
the Executive for Good Reason.  The
termination of the Executive’s employment by the Executive for Good
Reason.  For purposes of this Agreement, “Good
Reason” shall mean the occurrence of any of the following conditions and
the failure of the Company to remedy such condition(s) within thirty (30)
days after receipt by the Company of written notice thereof from the Executive,
which notice must


 


4

















 


be provided by the Executive to the Company within ninety (90) days of
the initial existence of such condition(s):


 


(i)            a
material diminution in the Executive’s authority, duties or responsibilities;


 


(ii)           a
requirement that the Executive report to a corporate officer or employee
instead of reporting directly to the Board (or similar governing body);


 


(iii)          a
material diminution in the Executive’s base compensation (as such term is used
in Treasury Regulation § 1.409A-1(n)(2)(ii) or any successor provision);


 


(iv)          a
material diminution in the budget over which the Executive retains authority;


 


(v)           the
relocation of the offices of the Company or an Affiliate at which the Executive
is principally employed to a location more than 50 miles from the location of
such offices on the date hereof, or any other material change in the geographic
location at which the Executive is based, except to the extent the Executive
was not previously assigned to a principal location and except for required
travel on the business of the Company or an Affiliate to an extent
substantially consistent with the Executive’s business travel obligations on
the date hereof; or


 


(vi)          any
other action or inaction that constitutes a material breach by the Company or
an Affiliate of the Agreement, including the failure by the Company to obtain
the assumption of the obligation to perform this Agreement by any Successors
and Assigns as contemplated in Section 16 hereof.


 


(h)           By
the Executive Without Good Reason. 
Termination by the Executive without Good Reason.


 


5.             Compensation
Upon Termination Prior to a Change in Control During the Initial Period or
Following a Change in Control Period.


 


(a)           Death
or Disability; By the Company for Cause; By the Executive without Good Reason;
Mutual Agreement; Expiration of Employment Term.  If, at any time other than coincident with
the occurrence of a Change in Control (as defined in Section 6) during the
Initial Period or during a Change in Control Period (as defined in Section 6),
the Employment Term is terminated by reason of the Executive’s death or
Disability, by the Company for Cause, by the Executive without Good Reason, by
mutual agreement of the parties, or by expiration of the Employment Term, the
Company’s sole obligation hereunder shall be to pay the Executive or his
estate, as the case may be, the Accrued Employment Compensation in a lump sum
within thirty (30) days following the Employment Termination Date (defined
below) (or, in the case of amounts described in


 


5

















 


clause (iii) of the following sentence, in accordance with the
terms of the applicable plan, program or arrangement).  For purposes of this Section 5, “Accrued
Employment Compensation” shall mean all amounts of compensation for services
rendered to the Company or any of its Affiliates, including (i) any
accrued and unpaid Base Salary, (ii) any accrued and unpaid bonus which
was earned for the year immediately preceding the year in which the Employment
Termination Date occurs, (iii) any accrued and unpaid vacation pay as of
the Employment Termination Date, (iv) a “Pro Rata Bonus” that is equal to
the Bonus Amount (defined below) multiplied by a fraction, (A) the numerator
of which is the number of days the Executive served in the year in which the
Employment Termination Date occurs through the Employment Termination Date, and
(B) the denominator of which is three hundred and sixty-five (365), (v) all
benefits accrued and unpaid under any benefit plans, programs or arrangements
in which the Executive shall have been a participant as of such Employment
Termination Date in accordance with the applicable terms and conditions of such
plans, programs or arrangements, and (vi) any reimbursable expenses
incurred by the Executive on behalf of the Company or any of its Affiliates
during the period ending on the Employment Termination Date but not previously
paid to the Executive.  For purposes of
this Section 5(a), “Bonus Amount” shall mean, as of the Employment
Termination Date, an amount equal to the annual incentive bonus that the
Executive would have earned for the full fiscal year in which the Employment
Termination Date occurs, based on the last monthly Annual Forecast produced by
the Company preceding the Employment Termination Date.  The “Annual Forecast” is the Company’s
forecast of the extent to which the performance goals for the fiscal year are
expected be achieved by the last day of the fiscal year.


 


(b)           By
the Company Without Cause; By the Executive for Good Reason.  If, at any time other than coincident with
the occurrence of a Change in Control (as defined in Section 6) during the
Initial Period or during a Change in Control Period (as defined in Section 6),
the Employment Term is terminated by the Company other than for Cause or by the
Executive for Good Reason, the Executive shall be entitled to the following
compensation:


 


(i)            within
ten (10) days of the Employment Termination Date (or, in the case of
amounts described in clause (v) of the definition of Accrued Employment
Compensation above, in accordance with the terms of the applicable plan,
program or arrangement), the Company shall pay the Executive all Accrued
Employment Compensation, except that for purposes of this Section 5(b)(i) and
Section 5(b)(ii), “Bonus Amount” shall mean, as of the Employment
Termination Date, the highest annual bonus paid or payable to the Executive in
respect of any of the three full fiscal years of the Company immediately
preceding the Employment Termination Date;


 


(ii)           within
thirty (30) days following such Employment Termination Date, the Company shall
pay the Executive as severance pay and in lieu of any further compensation for
periods subsequent to the Employment Termination Date, a lump sum amount equal
to the greater of


 


6

















 


(A) two (2) times the sum of (x) the Executive’s Base
Salary at the annual rate in effect on the Employment Termination Date and (y) the
Executive’s Bonus Amount and (B) the amount of the Base Salary and Bonus
Amount which would have been paid to the Executive during the Employment Term
had it not been terminated, assuming that all of the Bonus Amount would have
been paid to the Executive for each full fiscal year during the Employment
Term;


 


(iii)          during
the greater of (A) the twenty-four (24) month period following the
Employment Termination Date and (B) the balance of the Employment Term had
it not been terminated by the Company other than for Cause or by the Executive
for Good Reason  (the “Continuation
Period”), the Company shall at its expense continue on behalf of the
Executive and his dependents and beneficiaries the medical, dental,
hospitalization, prescription drug, and life insurance coverages and benefits
provided to the Executive immediately prior to the Employment Termination
Date.  The coverages and benefits
(including deductibles and costs) provided in this Section 5(b)(iii) during
the Continuation Period shall be in accordance with Section 3(d).  The Company’s obligation hereunder with
respect to the foregoing coverages and benefits shall be reduced to the extent
that the Executive obtains any such coverages and benefits pursuant to a
subsequent employer’s benefit plans, in which case the Company may reduce any
of the coverages or benefits it is required to provide the Executive hereunder
so long as the aggregate coverages and benefits of the combined benefit plans
is no less favorable to the Executive than the coverages and benefits required
to be provided hereunder.  This Section 5(b)(iii) shall
not be interpreted so as to limit any benefits to which the Executive, his
dependents or beneficiaries may be entitled under any of the Company’s employee
benefit plans, programs or practices following the Executive’s termination of
employment, including without limitation, retiree medical and life insurance
benefits, if any.  To the extent the
benefit continuation involves the reimbursement of expenses pursuant to this
Company’s supplemental medical plan, such reimbursement will occur in all
events prior to the last day of the calendar year following the calendar year
in which the Executive incurs the expense. 
In no event will the amount of expenses reimbursed in one year affect
the amount of expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year; and


 


(iv)          (A) notwithstanding
any contrary provisions contained in the applicable stock option agreements or
option plan, all stock options held by the Executive which are outstanding on
the Employment Termination Date shall become fully vested on the Employment
Termination Date and shall, subject to Section 12 of the Amended and
Restated Long-Term Stock Incentive Plan, remain outstanding for their entire
term and (B) notwithstanding any contrary provision in the applicable
restricted stock or other equity based award agreement or plan,


 


7

















 


all restrictions on all shares of restricted stock or other equity
based awards shall lapse and all such shares held by the Executive on the
Employment Termination Date shall become fully vested on the Employment
Termination Date.


 


6.             Compensation Upon Termination on a Change in Control
During the Initial Period or During the Change in Control Period.


 


(a)           Death
or Disability; By the Company for Cause; By the Executive Other than for Good
Reason or Pursuant to a Window Period Termination.  If, coincident with the occurrence of a
Change in Control (as defined below) during the Initial Period or within the
twenty-four (24) month-period following the occurrence of a Change in Control
during the Initial Period (the “Change in Control Period”), the
Executive’s employment with the Company is terminated (i) by reason of the
Executive’s death or Disability, (ii) by the Company for Cause, or (iii) by
the Executive other than (x) for Good Reason or (y) pursuant to a
Window Period Termination (as defined below), the Company’s sole obligation
hereunder shall be to pay the Executive or his estate, as the case may be, the
Change in Control Accrued Compensation. 
For purposes of this Section 6, “Change in Control Accrued
Compensation” shall mean all amounts of compensation for services rendered
to the Company or any of its Affiliates that have been earned or accrued
through the Employment Termination Date but that have not been paid as of the
Employment Termination Date, including (A) base salary, (B) reimbursement
for reasonable and necessary business expenses incurred by the Executive on
behalf of the Company or an Affiliate during the period ending on the
Employment Termination Date, (C) unless such amount is paid under Section 6A(a),
any accrued but unpaid bonus with respect to any fiscal year completed prior to
the Employment Termination Date and (D) vacation pay;  provided, however, that
Change in Control Accrued Compensation shall not include any amounts described
in clause (A) that have been deferred pursuant to any salary reduction or
deferred compensation elections made by the Executive.  Any reimbursement for reasonable and
necessary business expenses incurred by the Executive that is included within
the meaning of Change in Control Accrued Compensation will be made in
accordance with the Company’s expense reimbursement policy and in all events no
later than the last day of the calendar year following the calendar year in
which the Executive incurred the expense. 
In no event will the amount of expenses so reimbursed by the Company in
one year affect the amount of expenses eligible for reimbursement, or in-kind
benefits to be provided, in any other taxable year.


 


(b)           Any
Other Termination.  If, coincident
with the occurrence of a Change in Control (as defined below) during the
Initial Period or during the Change in Control Period, the Executive’s
employment with the Company is terminated for any reason other than as
specified in Section 6(a), or if the Executive terminates his employment
with or without Good Reason during the one month period ending on the earlier
of (i) the end of the second month of the calendar year following the
calendar year in which the Change in Control occurs, or (ii) the last day
of the seventh month following a Change in Control (a “Window Period
Termination”), the Executive shall be entitled to the following
compensation:


 


8

















 


(i)            the
Company shall pay the Executive the Change in Control Accrued Compensation;


 


(ii)           the
Company shall pay the Executive as severance pay an amount equal to 2.99 times
the sum of (A) the highest annual rate of Base Salary paid to the
Executive during the 12-month period immediately prior to the Employment
Termination Date and (B) the average of the annual cash bonuses paid to
the Executive during the 3 calendar years prior to the year in which the
Employment Termination Date occurs (prorated for any lesser period during which
the Executive has been employed or for which bonuses have been determined, if
applicable, and, in the case of each of (A) and (B), determined without
reduction for any portion thereof that has been deferred by the Executive).


 


(iii)          for
twelve (12) months following the Employment Termination Date (the “Change in
Control Continuation Period”), the Company shall continue on behalf of the
Executive and his dependents and beneficiaries the life insurance, disability,
medical, dental, prescription drug and hospitalization coverages and benefits
provided to the Executive immediately prior to a Change in Control (the “Benefits
Continuation”), or, if greater, the coverages and benefits provided at any time
thereafter.  The coverages and benefits
(including deductibles and costs to the Executive) provided in this Section 6(b)(iii) during
the Change in Control Continuation Period shall be no less favorable to the
Executive and his dependents and beneficiaries than the most favorable of such
coverages and benefits referred to above. 
Notwithstanding the foregoing, or any other provision of this Agreement,
for purposes of determining the period of continuation coverage to which the
Executive or any of the Executive’s dependents is entitled pursuant to Section 4980B
of the Internal Revenue Code of 1986, as amended (the “Code”), under the
Company’s medical, dental and other group health plans, or successor plans, the
Executive’s “qualifying event” will be the termination of the Change in Control
Continuation Period and the Executive will be considered to have remained
actively employed on a full-time basis through that date.  The Company’s obligation hereunder with
respect to the foregoing coverages and benefits shall be reduced to the extent
that the Executive obtains any such coverages and benefits pursuant to a
subsequent employer’s benefit plans, in which case the Company may reduce any
of the coverages or benefits it is required to provide the Executive hereunder
so long as the aggregate coverages and benefits (including deductibles and
costs to the Executive) of the combined benefit plans are no less favorable to
the Executive than the coverages and benefits required to be provided
hereunder.  This Section 6(b)(iii) shall
not be interpreted so as to limit any benefits to which the Executive, his
dependents or beneficiaries may be entitled under any of the Company’s employee
benefit plans, programs or practices following the Executive’s termination of
employment, including but not limited to, retiree medical


 


9

















 


and life insurance benefits.  To
the extent the Benefit Continuation involves the reimbursement of expenses
pursuant to the Company’s supplemental medical plan, such reimbursement will
occur in all events prior to the last day of the calendar year following the
calendar year in which the Executive incurred the expense.  In no event will the amount of expenses so
reimbursed by the Company in one year affect the amount of expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other taxable
year.


 


(iv)          (A) notwithstanding
any contrary provisions contained in the applicable stock option agreements or
option plan, all stock options held by the Executive which are outstanding on
the Employment Termination Date shall become fully vested on the Employment
Termination Date and shall, subject to Section 12 of the Amended and
Restated Long-Term Stock Incentive Plan, remain outstanding for their entire
term and (B) notwithstanding any contrary provision in the applicable
restricted stock or other equity based award agreement or plan, all
restrictions on all shares of restricted stock or other equity based awards
shall lapse and all such shares held by the Executive on the Employment
Termination Date shall become fully vested on the Employment Termination Date.


 


(c)           The
cash amounts provided for in Sections 6(a) and 6(b) shall be paid in
a single lump sum cash payment within ten (10) days after the Employment
Termination Date (or earlier, if required by applicable law).


 


(d)           If
the Executive’s employment is terminated by the Company or an Affiliate without
Cause prior to the date of a Change in Control that occurs during the Initial
Period, or any of the events or conditions that constitute Good Reason occur
prior to a Change in Control that occurs during the Initial Period, but the
Executive reasonably demonstrates that such termination or Good Reason
occurrence, as the case may be, (i) was at the request of a third party
who has indicated an intention or taken steps reasonably calculated to effect a
Change in Control (a “Third Party”) and who effectuates a Change in
Control during the Initial Period or (ii) otherwise arose in connection
with, or in anticipation of, a Change in Control which has been threatened or
proposed and which actually occurs during the Initial Period, such termination
or Good Reason occurrence, as the case may be, shall be deemed to have occurred
immediately after a Change in Control that occurs during the Initial Period, it
being agreed that any such action taken following shareholder approval of a
transaction which, if consummated, would constitute a Change in Control, shall
be deemed to be in anticipation of a Change in Control provided such
transaction is actually consummated.  In
the event that the Executive reasonably demonstrates that the termination of
his employment meets one of the requirements set forth in clauses (i) and (ii) above
and is thereby eligible to receive severance compensation pursuant to Section 6,
any such cash compensation shall be paid within thirty (30) days after the
occurrence of the Change in Control and all such non-cash compensation shall be
provided in accordance with the terms of Section 6; provided, however,
that such compensation shall only include amounts that exceed any amounts


 


10

















 


that the Company has already paid to the Executive under Section 5(b).  Executive shall not be required to return to
the Company any amounts paid or discontinue any benefits provided under Section 5(b) as
a result of a termination that occurs in accordance with this Section 6(d).


 


(e)           For
purposes of this Agreement, a “Change in Control” means the occurrence
of:


 


(i)            An
acquisition (other than directly from the Company) of any common stock of the
Company (“Common Stock”) or other voting securities of the Company
entitled to vote generally for the election of directors (the “Voting
Securities”) by any “Person” (as the term “person” is used for
purposes of Section 13(d) or 14(d) of the U.S. Securities
Exchange Act of 1934, as amended (“Exchange Act”)), immediately after
which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of fifty percent or more of the then
outstanding shares of Common Stock or the combined voting power of the Company’s
then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred,
Common Stock or Voting Securities which are acquired in a Non-Control
Acquisition (as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control.  A “Non-Control
Acquisition” shall mean an acquisition by (A) an employee benefit plan
(or a trust forming a part thereof) maintained by (x) the Company or (y) any
corporation or other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or indirectly,
by the Company (a “Subsidiary”), (B) the Company or its
Subsidiaries or (C) any Person in connection with a Non-Control
Transaction (as hereinafter defined);


 


(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 a
majority of the members of the Board; provided, however, that if the election, or nomination for election by the
Company’s shareholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for purposes of
this Agreement, be considered a member of the Incumbent Board; provided
further, however, that no 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 (with respect to the election
or removal of directors) 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 or settle
any election contest or Proxy Contest; or


 


11
















 


(iii)                               The
consummation of:


 


(A)                              A merger, consolidation,
reorganization or other business combination with or into the Company or in
which securities of the Company are issued, unless such merger, consolidation,
reorganization or other business combination is a “Non-Control Transaction.”  A “Non-Control Transaction” shall mean
a merger, consolidation, reorganization or other business combination with or
into the Company or in which securities of the Company are issued where:


 


(I)                                    the shareholders of the Company,
immediately before such merger, consolidation, reorganization or other business
combination own directly or indirectly immediately following such merger,
consolidation, reorganization or other business combination, at least fifty
percent of the combined voting power of the outstanding voting securities of
the corporation resulting from such merger or consolidation, reorganization or
other business combination (the “Surviving Corporation”) in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation, reorganization, or other
business combination,


 


(II)                                the individuals who were
members of the Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation, reorganization or other
business combination constitute at least two-thirds of the members of the board
of directors of the Surviving Corporation, or a corporation beneficially
directly or indirectly owning a majority of the combined voting power of the
outstanding voting securities of the Surviving Corporation, and


 


(III)                            no Person other than (a) the
Company, (b) any Subsidiary, (c) any employee benefit plan (or any
trust forming a part thereof) that, immediately prior to such merger, consolidation,
reorganization or other business combination was maintained by the Company, the
Surviving Corporation, or any Subsidiary, or (d) any Person who,
immediately prior to such merger, consolidation, reorganization or other
business combination had Beneficial Ownership of fifty percent or more of the
then outstanding Voting Securities or common stock of the Company, has
Beneficial Ownership of fifty percent or more of the combined voting power of
the Surviving Corporation’s then outstanding voting securities or its common
stock.


 


12

















 


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


 


(C)                                The sale or other
disposition of all or substantially all of the assets of the Company to any
Person (other than (a) any such sale or disposition that results in at
least fifty percent of the Company’s assets being owned by a Subsidiary or
Subsidiaries or (b) a distribution to the Company’s shareholders of the
stock of a Subsidiary or any other assets);


 


provided,  however, that no transaction or series of transactions by which
the Executive, or any Person in which the Executive has Beneficial Ownership,
directly or indirectly, of twenty-five percent of the outstanding ownership
interests or voting power, acquires fifty percent or more of the then
outstanding shares of Common Stock or the combined voting power of the Company’s
then outstanding Voting Securities shall constitute a Change in Control for
purposes of this Agreement (regardless of the form of transaction or series of
transactions by which such acquisition occurs (including, without limitation,
any acquisition described in clause (i) hereof or any merger or other
transaction described in clause (iii) hereof)).


 


Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur solely because any
Person (the “Subject Person”) acquired Beneficial Ownership of more than
the permitted amount of the then outstanding Common Stock or Voting Securities
as a result of the acquisition of Common Stock or Voting Securities by the
Company which, by reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional shares of Common Stock or Voting Securities
which increase the percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person to a level in excess
of an applicable threshold set forth in this Section 6(e), then a Change
in Control shall occur.


 


6A.                             Bonus Amount
for Year of Change in Control.


 


(a)                                  If the
Executive is employed by the Company until the last day of the fiscal year in
which a Change in Control occurs, the Executive will be entitled to receive the
greater of (i) the annual incentive bonus the Executive would have been
entitled to receive under the terms of the annual incentive bonus plan of the
Company in effect immediately prior to the Change in Control based on the
actual achievement of the performance goals for such fiscal year, or (ii) an
amount equal to the annual incentive bonus the Executive would have earned for
the full fiscal year in which the Change in Control occurs under the terms of
the annual incentive bonus plan of the Company in effect immediately prior to
the Change in Control based on the last monthly Annual Forecast produced by the
Company preceding the date of the Change in Control and multiplied by a
fraction, (A) the numerator of which is the number of days in the fiscal
year preceding the date of the Change in Control, and (B) the denominator
of which is


 


13

















 


365.  Any amount owed to Executive under this Section 6A(a) shall
be paid by March 15 of the year following the year in which the Change in
Control occurs.


 


(b)                                 If,  after a Change in Control and prior to the
last day of the fiscal year in which the Change in Control occurs, the
Executive’s employment with the Company or an Affiliate is terminated by the
Executive for Good Reason or pursuant to a Window Period Termination, or due to
the Executive’s death, or by the Company for any reason other than for Cause,
the Executive will be entitled to receive the greater of (i) an amount
equal to the annual incentive bonus the Executive would have earned for the
full fiscal year in which the Change in Control occurs under the terms of the
annual incentive bonus plan of the Company in effect immediately prior to the
Change in Control based on the last monthly Annual Forecast produced by the
Company preceding the Employment Termination Date and multiplied by a fraction,
(A) the numerator of which is the number of days in the fiscal year
preceding the Employment Termination Date, and (B) the denominator of
which is 365, and (ii) an amount equal to the annual incentive bonus the
Executive would have earned for the full fiscal year in which the Change in
Control occurs under the terms of the annual incentive bonus plan of the
Company in effect immediately prior to the Change in Control based on the last
monthly Annual Forecast produced by the Company preceding the date of the
Change in Control and multiplied by a fraction, (1) the numerator of which
is the number of days in the fiscal year preceding the date of the Change in
Control, and (2) the denominator of which is 365.  Any amount owed to Executive under this Section 6A(b) shall
be paid within 10 days of the Employment Termination Date.


 


(c)                                  For purposes of
this Section 6A, the “Annual Forecast” is the Company’s forecast of the
extent to which the performance goals for the fiscal year are expected to be
achieved by the last day of the fiscal year.


 


7.                                       Additional
Considerations.


 


(a)                                  Mitigation.  The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and no such payment shall be offset or reduced by
the amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 5(b)(iii) and Section 6(b)(iii).


 


(b)                                 Other Severance
Pay Arrangements.  The
severance pay and benefits provided for in Section 5 and Section 6 of
this Agreement shall be in lieu of any other severance pay to which the
Executive may be entitled under any severance or employment agreement with the
Company or any other plan, agreement or arrangement of the Company or any other
Affiliate of the Company.  The Executive’s
entitlement to any compensation or benefits other than as provided herein shall
be determined in accordance with the employee benefit plans of the Company and
any of its Affiliates and other applicable agreements, programs and practices
as in effect from time to time.


 


(c)                                  For purposes of
this Agreement, “Employment Termination Date” shall mean (i) in
the case of mutual agreement between the parties to terminate this


 


14

















 


Agreement, the date agreed upon by such
persons, (ii) in the case of the expiration of the Employment Term as
described in Section 4(b), the date of expiration, (iii) in the case
of the Executive’s death, his date of death, (iv) if the Executive’s
employment is terminated for Disability, thirty (30) days after Notice of
Termination (as defined below) is given (provided, however, that
the Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period), and (v) if the
Executive’s employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination for Cause
shall not be less than thirty (30) days and, in the case of a termination for
Good Reason shall not be more than sixty (60) days, from the date such Notice
of Termination is given); provided, however, that any party
receiving such Notice of Termination that in good faith believes that a dispute
exists concerning the basis for the termination must notify the party having
given such Notice of Termination within thirty (30) days of receipt of such
Notice of Termination, and further provided, that, in the event of a
termination as described in Section 6, notwithstanding the pendency of any
such dispute, the Company or an Affiliate shall continue to pay the Executive
his Base Salary and continue the Executive as a participant (at or above the
level provided prior to the date of such dispute) in all compensation,
incentive, bonus, pension, profit sharing, medical, hospitalization,
prescription drug, dental, life insurance and disability benefit plans in which
he was participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved whether or not the dispute is resolved in
favor of the Company, and the Executive shall not be obligated to repay to the
Company or an Affiliate any amounts paid or benefits provided pursuant to this
clause.  Notwithstanding the foregoing,
in no event shall the Employment Termination Date occur until the Executive
experiences a “separation from service” (within the meaning of Section 409A
of the Code), and notwithstanding anything contained herein to the contrary,
the date on which such separation from service takes place shall be the
Employment Termination Date.


 


(d)                                 (i)                                     Notwithstanding
anything in this Agreement to the contrary, in the event that it is determined
(as hereafter provided) that any payment (other than the Gross-Up Payments
provided for in this Section 7(d) and Annex A) or distribution
by the Company or any of its Affiliates to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right or similar
right, or the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a “Payment”), would be subject
to the excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being considered “contingent on a change in
ownership or control” of the Company, within the meaning of Section 280G
of the Code (or any successor provision thereto) or to any similar tax imposed
by state or local law, or any interest or penalties with respect to such tax
(such tax or taxes, together with any such interest and penalties, being
hereafter collectively referred to as the “Excise Tax”), then the
Executive will be entitled to receive an additional payment or payments
(collectively, a “Gross-Up Payment”). 
The Gross-Up Payment will be in an amount such that, after payment by
the Executive


 


15

















 


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.


 


(ii)                                  The obligations set forth in
Section 7(d)(i) will be subject to the procedural provisions
described in Annex A.


 


8.                                       Notice of Termination.  Any intended termination by the Company of
the Executive’s employment as Chairman and/or CEO shall be communicated by a
Notice of Termination from the Company to the Executive, and any intended
termination by the Executive of the Executive’s employment as Chairman and/or
CEO shall be communicated by a Notice of Termination from the Executive to the
Company.  For purposes of this Agreement,
“Notice of Termination” shall mean a written notice of termination of
the Executive’s employment as Chairman and/or CEO, as applicable, signed by the
Executive if to the Company or by a duly authorized officer of the Company if
to the Executive, which indicates the specific termination provision in this
Agreement, if any, relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive’s employment or service under the provision so indicated.  Any purported termination by the Company or
by the Executive shall be communicated by written Notice of Termination to the
other.  For purposes of this Agreement,
no such purported termination of employment or service shall be effective
without such Notice of Termination.  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, Disability or Cause shall not serve to 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.


 


9.                                       Covenants.


 


(a)                                  Non-Competition.  By and in consideration of the Company’s
entering into this Agreement and the payments to be made and benefits to be
provided by the Company hereunder and further in consideration of the Executive’s
exposure to the proprietary information of the Company, the Executive agrees
that the Executive will not, during the Employment Term, and thereafter during
the Non-competition Term (as hereinafter defined), directly or indirectly, own,
manage, operate, join, control, be employed by, or participate in the
ownership, management, operation or control of, or be connected in any manner
with, including but not limited to holding any position as a shareholder,
director, officer, consultant, independent contractor, employee, partner, or
investor in, any Restricted Enterprise (as defined below); provided, however, that in no event shall
ownership of less than 5% of the outstanding equity securities of any issuer
whose securities are registered under the Exchange Act, standing alone, be
prohibited by this Section 9.  For
purposes of this paragraph, the term “Restricted Enterprise” shall mean
any person, corporation, partnership or other entity that is engaged in the
design and development of high-performance surveillance cameras, imaging
systems or related motion control technologies or otherwise competes, directly
or indirectly, with any


 


16

















 


business or activity conducted or proposed to
be conducted by the Company or any of its subsidiaries or Affiliates as of the
date of the Executive’s termination of employment; provided, however,
that any company in which the Executive holds an equity stake as of the
Employment Termination Date shall not be considered a Restricted Enterprise
under this Agreement as long as, prior to the Executive’s investment in such
company, the Executive informed the Board of his intent to invest in such
company and the Board did not object to such investment.  Following termination of employment, upon
request of the Company, the Executive shall notify the Company of the Executive’s
then current employment status.  For
purposes of this Agreement, the “Non-competition Term” shall mean the
period beginning on the Employment Termination Date and ending on the first
anniversary of such date.  Any material
breach of the terms of this paragraph shall be considered Cause under Section 4(e).


 


(b)                                 Unauthorized
Disclosure.  The
Executive agrees and understands that during the Executive’s employment with
the Company, the Executive has been and will be exposed to and receive
information relating to the affairs of the Company considered by the Company to
be confidential and in the nature of trade secrets (including but not limited
to procedures, memoranda, notes, records and customer lists, whether such
information has been or is made, developed or compiled by the Executive or
otherwise has been or is made available to him) (any and all such information,
the “Confidential Information”). 
The Executive agrees that, during the Employment Term and thereafter, he
shall keep such Confidential Information confidential and will not disclose
such Confidential Information, either directly or indirectly, to any third
person or entity without the prior written consent of the Company; provided,
however, that (i) the Executive shall have no such obligation to
the extent such Confidential Information is or becomes publicly known other
than as a result of the Executive’s breach of his obligations hereunder or is
received by the Executive following the Employment Termination Date and (ii) the
Executive may, after giving prior notice to the Company to the extent
practicable under the circumstances, disclose such Confidential Information to
the extent required by applicable laws or governmental regulations or judicial
or regulatory process.  The Executive
agrees that all Confidential Information is and will remain the property of the
Company.  The Executive further agrees
that, during the Employment Term and thereafter, he shall hold in the strictest
confidence all Confidential Information, and shall not, directly or indirectly,
duplicate, sell, use, lease, commercialize, disclose or otherwise divulge to
any person or entity any portion of the Confidential Information or use any
Confidential Information for his own benefit or profit or allow any person or
entity, other than the Company and its authorized employees, to use or
otherwise gain access to any Confidential Information.  All memoranda, notes, records, customer lists
and other documents made or compiled by the Executive or otherwise made
available to him concerning the business of the Company or its subsidiaries or
Affiliates shall be the Company’s property and shall be delivered to the
Company upon the termination of the Executive’s employment with the Company or
at any other time upon request by the Company, and the Executive shall retain
no copies of those documents.  The
Executive shall never at any time have or claim any right, title or interest in
any material, invention or matter of any sort created, prepared or used in
connection with the business of the Company or its subsidiaries or Affiliates.


 


17

















 


(c)                                  Non-Solicitation.  Until the expiration of one (1) year
following the Employment Termination Date, the Executive will not directly or
indirectly at any time solicit or induce or attempt to solicit or induce any
employee(s), sales representative(s), agent(s) or consultant(s) of
the Company or its subsidiaries or Affiliates to terminate their employment,
representation or other association with the Company or its subsidiaries or
Affiliates.


 


(d)                                 The Executive
agrees that any breach of the terms of this Section 9 would result in
irreparable injury and damage to the Company and/or its subsidiaries or
Affiliates for which the Company and/or its subsidiaries or Affiliates would
have no adequate remedy at law; the Executive therefore also agrees that in the
event of said breach or any threat of breach, the Company and/or its
subsidiaries or Affiliates, as applicable, shall be entitled to an immediate
injunction and restraining order to prevent such breach and/or threatened
breach and/or continued breach by the Executive and/or any and all persons
and/or entities acting for and/or with the Executive, without having to prove
damages, in addition to any other remedies to which the Company and/or its
subsidiaries or Affiliates may be entitled at law or in equity.  The terms of this paragraph shall not prevent
the Company and/or its subsidiaries or Affiliates from pursuing any other
available remedies for any breach or threatened breach hereof, including but
not limited to the recovery of damages from the Executive.  The Executive and the Company further agree
that the provisions of the covenants contained in this Section 9 are
reasonable and necessary to protect the businesses of the Company and its
subsidiaries or Affiliates because of the Executive’s access to confidential
information and his material participation in the operation of such
businesses.  Should a court or arbitrator
determine, however, that any provisions of the covenants contained in this Section 9
are not reasonable or valid, either in period of time, geographical area, or
otherwise, the parties hereto agree that such covenants should be interpreted
and enforced to the maximum extent which such court or arbitrator deems
reasonable or valid.  The existence of
any claim or cause of action by the Executive against the Company and/or its
subsidiaries or Affiliates, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of the
covenants contained in this Section 9.


 


10.                                 Fees and Expenses.  The Company shall pay all reasonable legal
fees and related expenses (including the costs of experts, evidence and
counsel) incurred by the Executive as they become due as a result of or in
connection with (a) the Executive’s contesting, defending or disputing the
basis for the termination of the Executive’s employment, (b) the Executive’s
hearing before the Board as contemplated in Section 4(e), or (c) the
Executive’s seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits.  All payments by the Company of the reasonable
legal fees and related expenses of the Executive under this Section 10
shall be for fees and expenses incurred during the Executive’s lifetime and
shall be made within ninety (90) days following the date the Executive submits
evidence of the incurrence of such fees and expenses, and in all events prior
to the last day of the calendar year following the calendar year in which the
Executive incurs the fees and expenses. 
In no event will the amount of fees or expenses reimbursed or paid in
one year affect the amount of fees or expenses eligible for reimbursement, or
in-kind benefits to be provided, in any other taxable year.


 


18

















 


11.                                 Non-Exclusivity of Rights.  Except as provided in Section 5(b)(iii),
Section 6(b)(iii) and Section 7(b), nothing in this Agreement
shall prevent or limit the Executive’s continuing or future participation in
any benefit, bonus, incentive or other plan or program provided by the Company
or any of its Affiliates for which the Executive may qualify, nor shall
anything herein limit or reduce such rights as the Executive may have under any
other agreements with the Company or any of its Affiliates.  Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan or program of the
Company or any of its Affiliates shall be payable in accordance with such plan
or program, except as explicitly modified by this Agreement.


 


12.                                 Settlement of Claims.  The Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, defense, recoupment, or other right
which the Company may have against the Executive or others.


 


13.                                 Indemnification.  The Company agrees to indemnify the Executive
for his activities as Chairman and CEO (as applicable) to the fullest extent
permitted by law and any applicable indemnification agreement then in effect to
which the Executive and the Company are parties, and to cover the Executive
under any directors and officers liability insurance obtained by the Company.


 


14.                                 Non-Waiver of Rights.  The failure to enforce at any time the
provisions of this Agreement or to require at any time performance by any other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof, or the right of any party to enforce each and every provision
in accordance with its terms.


 


15.                                 Notice.  For the purposes of this Agreement, notices
and all other communications provided for in this Agreement (including the
Notice of Termination) shall be in writing and shall be delivered in person, by
telecopier (with confirmation of receipt) or by United States mail, postage
prepaid, certified or registered, addressed to the Company at its principal
office to the attention of the President, or to the Executive at his residence
address shown on the employment records of the Company.  All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof, except that notice of change of address
shall be effective only upon receipt.


 


16.                                 Successors and Assigns.


 


(a)                                  This Agreement
shall be binding upon and shall inure to the benefit of the Company and its
Successors and Assigns, and the Company shall require any Successor or Assign
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no
succession or assignment had taken place. 
For purposes of this Agreement, “Successors and Assigns” shall
mean a corporation or other entity with which the Company may be merged or
consolidated or  which acquires all
or substantially all the assets and business of the Company, whether by
operation of law or otherwise.  The term “Company”
as used herein shall include such Successors and Assigns.


 


19

















 


(b)                                 Neither this
Agreement nor any right or interest hereunder shall be assignable or
transferable by the Executive, his beneficiaries or his legal representatives,
except by will or by the laws of descent and distribution.  This Agreement shall inure to the benefit of
and be enforceable by the Executive’s legal personal representative.


 


17.                                 Entire Agreement.  This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, oral or
written, between the parties hereto with respect to the subject matter hereof,
including the Prior Agreement and the SPA.


 


18.                                 Severability.  If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.


 


19.                                 Governing Law.  This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without giving effect to the choice of law principles thereof.


 


20.                                 Number and
Headings.  Whenever
any words used herein are in the singular form, they shall be construed as
though they were also used in the plural form in all cases where they would so
apply.  The headings contained herein are
solely for purposes of reference, are not part of this Agreement and shall not
in any way affect the meaning or interpretation of this Agreement.


 


21.                                 Counterparts.  This Agreement may be executed in two (2) counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.


 


22.                                 Section 409A
of the Code.


 


(a)                                  Each payment or
reimbursement and the provision of each benefit under this Agreement shall be
considered a separate payment and not one of a series of payments for purposes
of Section 409A of the Code.  To the
extent applicable, it is intended that this Agreement comply with the
provisions of Section 409A of the Code so that the income inclusion
provisions of Section 409A(a)(1) do not apply to the Executive.  This Agreement shall be administered in a
manner consistent with this intent. 
Reference to Section 409A of the Code is to Section 409A of
the Internal Revenue Code of 1986, as amended, and will also include any
regulations, or any other formal guidance, promulgated with respect to such Section by
the U.S. Department of the Treasury or the Internal Revenue Service.


 


(b)                                 Notwithstanding
anything in this Agreement to the contrary, if the Executive is a “specified
employee” (within the meaning of Section 409A) on the Employment
Termination Date, in the case of any payment made or benefit provided pursuant
to this Agreement that is considered to be a “deferral of compensation” (as
such phrase is defined for purposes of Section 409A) and which is payable
upon the Executive’s “separation from service” (within the meaning of Section 409A
of the Code) and which otherwise is payable within six months of such
separation from service, the


 


20

















 


payment date for such payment or benefit
shall be the date that is the first day of the seventh month after the date of
the Executive’s “separation from service” (determined in accordance with Section 409A).


 


23.                                 Miscellaneous.  No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and the Company.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.  No
agreement or representation, oral or otherwise, express or implied, with
respect to the subject matter hereof has been made by either party which is not
expressly set forth in this Agreement.


 


[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


 


21

















 


IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by
authority of its Board, and the Executive has hereunto set his hand, on the day
and year first above written.


 


	
   

  	
  AXSYS TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eliot M. Fried

  
	
   

  	
   

  	
  Name: Eliot M. Fried

  
	
   

  	
   

  	
  Title: Chairman of the
  Compensation Committee of the Board of Directors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Stephen W. Bershad

  
	
   

  	
  Stephen W. Bershad

  



 
















 


Annex
A


 


Excise Tax Gross-Up
Procedural Provisions


 


(1)                                Subject to the provisions of Paragraph 5,
all determinations required to be made under Section 7(d) of the
Agreement and this Annex A, including whether an Excise Tax is payable by the
Executive and the amount of such Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Executive and the amount of such
Gross-Up Payment, if any, will be made by CBIZ Mahoney Cohen or another
nationally recognized accounting or law firm (the “National Firm”)
selected by the Executive in the Executive’s sole discretion.  The Executive will direct the National Firm
to submit its determination and detailed supporting calculations to both the
Company and the Executive within thirty (30) calendar days after the date of
termination of the Executive’s employment, if applicable, and any such other
time or times as may be requested by the Company or the Executive.  If the National Firm determines that any Excise
Tax is payable by the Executive, the Company will pay the required Gross-Up
Payment to the Executive after receipt of such determination and calculations
with respect to any Payment to the Executive as provided in Paragraph 7.  If the National Firm determines that no
Excise Tax is payable by the Executive with respect to any material benefit or
amount (or portion thereof), it will, if requested by the Executive, at the
same time as it makes such determination, furnish the Company and the Executive
with an opinion that the Executive has substantial authority not to report any
Excise Tax on the Executive’s federal, state or local income or other tax
return with respect to such benefit or amount. 
As a result of the uncertainty in the application of Section 4999
of the Code and the possibility of similar uncertainty regarding applicable
state or local tax law at the time of any determination by the National Firm
hereunder, it is possible that Gross-Up Payments that will not have been made
by the Company should have been made (an “Underpayment”), consistent
with the calculations required to be made hereunder.  In the event that the Company exhausts or
fails to pursue its remedies pursuant to Paragraph 5 and the Executive
thereafter is required to make a payment of any Excise Tax, the Executive will direct
the National Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible.  Any such Underpayment will be promptly paid
by the Company to, or for the benefit of, the Executive after receipt of such
determination and calculations as provided in Paragraph 7.


 


(2)                                The Company and the Executive will each
provide the National Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as the case may
be, reasonably requested by the National Firm, and otherwise cooperate with the
National Firm in connection with the preparation and issuance of the
determinations and calculations contemplated by Paragraph 1.  Any determination by the National Firm as to
the amount of the Gross-Up Payment will be binding upon the Company and the
Executive.


 


23

















 


 


(3)                                The federal, state and local income or
other tax returns filed by the Executive will be prepared and filed on a
consistent basis with the determination of the National Firm with respect to
the Excise Tax payable by the Executive. 
The Executive will report and make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of the Executive’s federal income tax
return as filed with the Internal Revenue Service and corresponding state and local
tax returns, if relevant, as filed with the applicable taxing authority, and
such other documents reasonably requested by the Company, evidencing such
payment.  If prior to the filing of the
Executive’s federal income tax return, or corresponding state or local tax
return, if relevant, the National Firm determines that the amount of the
Gross-Up Payment should be reduced, the Executive will within five (5) business
days pay to the Company the amount of such reduction.


 


(4)                                The fees and expenses of the National
Firm for its services in connection with the determinations and calculations
contemplated by Paragraph 1 will be borne by the Company.  If such fees and expenses are initially paid
by the Executive, the Company will reimburse the Executive the full amount of
such fees and expenses after receipt from the Executive of a statement therefor
and reasonable evidence of the Executive’s payment thereof, as provided in
Paragraph 7.


 


(5)                                The Executive will notify the Company in
writing of any claim by the Internal Revenue Service or any other taxing
authority that, if successful, would require the payment by the Company of a
Gross-Up Payment.  Such notification will
be given as promptly as practicable but no later than ten (10) business
days after the Executive actually receives notice of such claim and the
Executive will further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive).  The Executive
will not pay such claim prior to the expiration of the 30-calendar-day period
following the date on which the Executive gives such notice to the Company or,
if earlier, the date that any payment of amount with respect to such claim is
due. If the Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive will:


 


(a)                                  provide the Company with any written
records or documents in Executive’s possession relating to such claim
reasonably requested by the Company;


 


(b)                                 take such action in connection with
contesting such claim as the Company reasonably requests in writing from time
to time, including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the subject matter
and reasonably selected by the Company;


 


(c)                                  cooperate with the Company in good faith
in order effectively to contest such claim; and


 


(d)                                 permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such 


 


24

















 


contest and will
indemnify and hold harmless the Executive, on an after-tax basis, for and
against any Excise Tax or income or other tax, including interest and penalties
with respect thereto, imposed as a result of such representation and payment of
costs and expenses.  Without limiting the
foregoing provisions of this Paragraph 5, the Company will control all
proceedings taken in connection with the contest of any claim contemplated by
this Paragraph 5 and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim (provided, however, that
the Executive may participate therein at the Executive’s own cost and expense)
and may, at its option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company determines; provided, however, that
if the Company directs the Executive to pay the tax claimed and sue for a
refund, the Company will advance the amount of such payment to the Executive on
an interest-free basis and will indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income or other tax, including
interest or penalties with respect thereto, imposed with respect to such
advance; and provided further, however, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which the contested amount is claimed to be due is limited
solely to such contested amount. 
Furthermore, the Company’s control of any such contested claim will be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive will be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.


 


(6)                                If, after the receipt by the Executive of
an amount advanced by the Company pursuant to Paragraph 5, the Executive
receives any refund with respect to such claim, the Executive will (subject to
the Company’s complying with the requirements of Paragraph 5) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto).  If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Paragraph 5, a determination is made
that the Executive is not entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of thirty (30) calendar days
after such determination, then such advance will be forgiven and will not be
required to be repaid and the amount of any such advance will offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid by the
Company to the Executive pursuant to Section 3 and this Annex A.


 


(7)                                Notwithstanding any other provision of
this Annex A to the contrary, but subject to Section 22 of the Agreement,
all taxes and expenses described in Section 7(d) of the Agreement and
this Annex A shall be paid or reimbursed within five (5) business days
after the Executive submits evidence of incurrence of such taxes and/or
expenses, provided that in all events such reimbursement shall be made on or
before the last day of the year following (a) the year in which the
applicable taxes are remitted or expenses are 


 


25

















 


incurred or, (b) in
the case of reimbursement of expenses incurred due to a tax audit or litigation
in which there is no remittance of taxes, the year in which the audit is
completed or there is a final and nonappealable settlement or other resolution
of the litigation, in accordance with Treasury Regulation
§1.409A-3(i)(1)(v).  The Executive shall
be required to submit all requests for reimbursements no later than thirty
(30) days prior to the last day for reimbursement described in the prior
sentence.  Any expense reimbursed by the
Company in one taxable year in no event will affect the amount of expenses
required to be reimbursed by the Company in any other taxable year.


 


26